Now the country’s leadership is silent on growth targets altogether. At an important meeting of above No GDP targets were mentioned by government leaders on Thursday, and analysts have said it is a sign the government believes it may not be able to meet its targets after all.
The tone of this meeting was in sharp contrast to the previous Politburo meeting in April, when policymakers pledged to “make efforts to meet economic and social goals” for this year.
“Given that China only grew 2.5% in the first half, the original was [annual] The target of around 5.5% is too high,” said Larry Hu, chief China economist at Macquarie Capital, in a report late Thursday.
“At today’s meeting, policymakers used the new phrase: ‘Strive for the best outcome.’ That means they no longer see 5.5% or even 5% as achievable this year,” he added.
Betty Wang, senior China economist at ANZ, also said on Friday that policymakers are “prepared to miss the growth target.”
No flexibility at zero Covid
Politics has a special “political meaning,” the Politburo statement said.
Analysts now assume that China will stick to its rigid Covid strategy until next year.
“The Politburo pledged to stick to the zero-Covid strategy and specifically mentioned for the first time that politics is a particularly important factor to consider when dealing with the relationship between Covid controls and socio-economic development,” Nomura said analysts in a report on Thursday.
“This supports our view that Beijing will maintain the zero-Covid strategy at least until March 2023, when the current political restructuring is fully completed,” they added.
Nomura added that China is expected to grow 3.3% in 2022.
The Communist Party will undergo a leadership reshuffle at its 20th Congress this fall. President Xi Jinping is expected to seek a historic third term at the meeting. If successful, he would be re-elected as President at the March 2023 parliamentary session.
Real estate crisis and financial risks
In recent weeks, thousands of disgruntled homebuyers have threatened to stop making mortgage payments on unfinished homes if construction isn’t completed on time. The boycott came as a growing number of projects were delayed or stalled by a lack of money from developers.
“[We] must stabilize the real estate market”, the Politburo statement said.
It stressed that local governments should take responsibility to ensure pre-sold homes are completed and delivered to home buyers.
“In other words, it’s not very likely that the central government will set up a mega-fund to buy up the majority of unfinished projects,” Macquarie Capital’s Hu said.