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Chinese President Xi Jinping. Picture: BLOOMBERG
Chinese President Xi Jinping. Picture: BLOOMBERG

Beijing — China will step up policy support for the economy, including its embattled internet platforms, as domestic Covid-19 outbreaks and the war in Ukraine raise risks, a top decision-making body of the ruling Communist Party said on Friday, lifting markets.

Beijing has set an economic growth target of 5.5% this year, which private economists have said will be difficult to reach without significant stimulus, as lockdowns and other heavy curbs to battle the pandemic create havoc for supply chains.

During Friday’s meeting chaired by President Xi Jinping, the Politburo said it will support Covid-hit industries and small firms, accelerate infrastructure construction, and stabilise transport, logistics, and supply chains, according to a report by the state-run Xinhua news agency.

Chinese share prices surged, especially internet stocks battered by a clampdown last year, as the Politburo’s pledge to “promote the healthy development of the platform economy” bolstered hopes that the worst is over for the sector.

A person with knowledge of the matter said China was scheduled to have a symposium with the country’s internet majors early next month.

Covid-19 and events in Ukraine have strengthened headwinds for the economy in what is a crucial year for China and for Xi, who is expected to secure a precedent-breaking third leadership term in the autumn.

“Stabilising growth, employment and prices are facing new challenges. It is very important to do a good job in economic work and effectively protect and improve people's livelihood,” Xinhua reported the Politburo as saying.

Analysts believe more stimulus measures and some easing of property curbs will be needed if the government wants to meet its 2022 growth target of around 5.5%.

“While these messages are positive, the key is about the specific policies and their implementation,” said Zhiwei Bhang, president and chief economist at Pinpoint Asset Management.

“The economy is in trouble, with second-quarter GDP growth likely turning negative (year-on-year). A significant change of macro policy is necessary to turn the economy around,” he said.

Ting Lu, chief China economist at Nomura, said he still expected the economy to grow 1.8% in the second quarter and 3.9% in 2022.

Covid-19 jitters

Financial markets have been hit hard over the past two weeks by fears that lockdowns would cause severe damage to China’s economy and derail a global recovery just as many countries are rebounding from pandemic-led slumps.

China’s benchmark share index jumped more than 2% on Friday, with the tech-focused STAR50 Index surging nearly 5%. Shares of Hong Kong-listed tech firms rose, with the Hang Seng Tech Index up by 10%.

On Tuesday, Xi chaired a meeting that announced a big infrastructure push to boost demand, reinforcing Beijing's reliance on big-ticket projects to spur growth.

“We should accelerate the implementation of policies, implement tax rebates, tax and fee cuts and other policies, and make good use of all kinds of monetary policy tools,” Xinhua’s readout from Friday’s meeting said.

Beijing will also back “healthy” development of the property market, including improved supervision of presale escrow funds, fanning analysts' expectations that some cities will relax supervision over such funds to help ease a liquidity crunch for developers.

Still, the Politburo said authorities will continue to implement the controversial dynamic zero-Covid-19 policy to control outbreaks while minimising the pandemic’s impact on the economy.

Reuters

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