Editorial | A challenging time for China’s leadership as the economy falters
- Growth in the first-quarter exceeded expectations but the true picture will only emerge later as fallout from the Covid pandemic and Russia’s invasion of Ukraine takes its toll
China’s economy is facing a complex outlook that will test its leaders.
First-quarter gross domestic product growth does not reflect it. At 4.8 per cent growth year on year, stronger than 4 per cent in the previous quarter, it exceeded market expectations. The trend is in line with the goal of 5.5 per cent for 2022 set by Premier Li Keqiang in his recent annual work report.
But the future is heavily clouded with uncertainties and negative factors. Chief among them are the current Covid-19 outbreak in Shanghai and the war in Ukraine. The full effects are more likely to show up in second-quarter GDP growth.
In the January-March quarter, fix-asset investment and industrial production drove GDP growth. But consumption and retail spending – gauges of consumer sentiment – fell faster than expected, even before Shanghai’s lockdown and the war’s effect on commodity prices were reflected.
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Politically speaking, employment rates are even more important. The surveyed jobless rate in March of 5.8 per cent is higher than the target of “within 5.5 per cent”. Keeping the Covid outbreak under control will be critical to reversing a worrying trend.
To be sure, the central government has some powerful tools to stimulate the economy, such as deep reserves, and supply-side pressures may be expected to ease once the coronavirus outbreak is brought under control.