China should take forceful measures to raise economic growth above 5 per cent in the second quarter, while remaining on high alert for possible capital outflows, policy advisers said. China’s economy grew by 4.8 per cent in the first quarter, but lockdowns in major cities such as Shanghai are taking an increasing toll on the economy. The weeks-long lockdown in the country’s key commercial and logistical hub is expected to eat into second-quarter growth, challenging Beijing’s already ambitious growth target of “around 5.5 per cent” this year. “First-quarter growth failed to pass 5 per cent as we had expected, mainly because most economic indicators slowed down in March,” Wang Yiming, a member of the central bank’s monetary policy committee, told an economic forum in Beijing on Sunday. It is very important that we can effectively contain the pandemic, especially by early May Wang Yiming Coronavirus controls, Russia’s invasion of Ukraine and the US Federal Reserve’s rate increases will continue to put downward pressure on the economy in the coming months, he said. “Therefore, it is very important that we can effectively contain the pandemic, especially by early May, and take stronger macro policies to counter the hit from the pandemic and to bring economic growth in the second quarter back to the level above 5 per cent. This will be the foundation for realising the full-year target,” he said. The remarks came at the time when authorities promised to unveil new measures to shore up market sentiments amid growing concerns about Beijing’s handling of multiple economic headwinds. Zhu Guangyao, a former finance minister, told the same forum that the US monetary policy shift was expected to come at an “unprecedented intensity and pace” which will be “the biggest pressure for us”. “Over the past two months, we’ve seen capital outflows amid rate hikes and the expectation of more hikes,” he said. Foreign investors have also slashed bond, equity and yuan holdings this year. The yuan-US dollar exchange rate retreated to a one-year low this week. Zhu said China should clearly monitor the US Federal Reserve’s timetable to be on high alert for capital flows from China and emerging markets, adding: “This is indeed our top priority.” Wang also called on authorities to “reasonably optimise” pandemic controls. “When insisting on the zero-Covid policy, we should make sure the controls are more precise and ensure logistics and the supply chain are unimpeded,” he said. China’s forex reserves fall US$26 billion amid ongoing capital outflows To shore up growth, the country needed to pace up infrastructure construction such as the Sichuan-Tibet railway and the trade corridor to connect the hinterlands in the west region, Wang argued. He also suggested subsidies for low-income groups, which would help to stimulate consumption, and take measures stabilise the expectations of small businesses. This month the International Monetary Fund (IMF) slashed its growth forecast for China this year from 4.8 to 4.4 per cent, citing increasing uncertainties from the spread of the Omicron variant and strict zero-Covid policy and the financial risks large property developers were exposed to. Zhu said the IMF had been wrong about its China forecast before and there was ample room to implement economic policies. He also said China should address the risks of adjustment in the chip production supply chain initiated by the US and its allies. The US has approved US$52 billion to fund chip producers and the European Union also plans a €43 billion (US$46.4 billion) subsidy for local chip producers. “Currently 80 per cent of global chip production is in East Asia, which the US and the Western world have realised is a severe challenge to their economic growth. So over the past months, they adopted and insisted on an ideological approach to replace matured chip production and supply chains within the Asia-Pacific economic framework,” Zhu said. Last October, US President Joe Biden raised the proposal to set up an Indo-Pacific economic framework to solidify ties with key economies in the region and build a supply china that excludes China.