Editorial | Relaxation of Covid rules can be the boost that China’s economy needs

China’s economy is moribund. Ahead of the all-important party congress next month, Premier Li Keqiang has come to the rescue. New support measures are being rolled out. But under continuing crippling pandemic controls, growth will remain slow. The latest trade figures are disappointing. Exports rose by 7.1 per cent last month, compared with a year earlier, but were down from 18 per cent growth in July, while imports grew by a meagre 0.3 per cent. The falling yuan against the US dollar is no longer seen as the boost to Chinese exporters it once was. There were, however, some early signs of recovery. Industrial production increased by 4.2 per cent in August from a year before, while retail sales rose by 5.4 per cent last month. Fixed-asset investment also rose by 5.8 per cent in the January-August period, while the jobless rate stood at 5.3 per cent in August.

Several key growth engines present a challenging picture. Many infrastructure projects at local and provincial levels are mired in heavy debt. Financial and innovative hubs such as Shanghai and Shenzhen have recently been hobbled by lockdowns and quarantine. The real estate market is still picking up the pieces. Thankfully, inflation has been moderate. The key to recovery is the health of small and medium-sized enterprises, many of which are desperate. Li has thrown them a lifeline through tax cuts, subsidies and credit support in the hope of keeping more of them afloat and saving jobs.

Provincial inspection teams – headed by central bank governor Yi Gang, finance minister Liu Kun and other officials – have been touring the country to gauge local problems. It is a wise move to have included planning with Vice-Premier Sun Chunlan, who is in charge of the country’s pandemic measures, to achieve better coordination.

The country is working to identify new growth engines. Financial and hi-tech expertise in the coastal regions such as in fintech will play a major part. Electric cars will be the next big thing. BYD has taken over Tesla as the world’s biggest producer of electric vehicles, but there are at least a dozen other domestic brands that are up and coming.

Even so, many economists warn there is no quick solution. But there can be a quick and mighty relief: lifting or at least relaxing draconian anti-Covid measures. After the party congress at which President Xi Jinping is expected to secure a third term, significant changes to the public health policy are needed. Otherwise, a disappointed public will continue to drag down domestic consumption, and the blowback will further undermine the confidence and interests of foreign investors and companies in the country. The economy needs stability; investors need predictability. The current strict anti-Covid regime has served its purpose and needs to be reprioritised.