In a New Year’s address on Saturday, Xi said the country was in a new phase of Covid control and had adapted after following a scientific and targeted approach. A day earlier, he said the country’s strategy had been “optimized” to protect people’s lives and minimize economic costs.
On December 7, the government took final easing measures on its strict zero-tolerance approach to containing Covid, which included instant lockdowns, frequent mass testing and widely closed borders. Xi had repeatedly defended the strategy despite rising economic costs, including until mid-October.
But on Saturday, the Chinese leader addressed the hardships endured by the country’s people during strict lockdowns, as well as the rapid spread of Covid.
“Since Covid-19 hit, we’ve put people first and lives first,” Xi said. “With extraordinary efforts, we overcame unprecedented difficulties and challenges, and it has not been an easy journey for anyone. We have now entered a new phase of Covid response where difficult challenges remain.
The president had touted his achievements in October, when he secured a third term in office at a Communist Party congress. Yet just over a month later, his government faced the most widespread protests in decades as public anger over his Covid Zero strategy boiled over.
China’s Covid unrest boils over as citizens defy lockdown efforts
Without directly referring to the protests, Xi said in his speech that it was “natural” for the country’s 1.4 billion people to have different concerns and views on certain issues. “What matters is that we build consensus through communication and consultation,” he said.
In addition to repeated Covid outbreaks, China’s economy in 2022 has been muddied by a persistent housing market slump, sluggish consumer demand and a waning overseas appetite for its products.
Xi’s telecast came after data earlier in the day showed economic activity in December contracted the most from the previous month since February 2020. Home sales continued to tumble in December, while reports due this week are expected to show further compression in the manufacturing and service sectors.
While analysts expected growth to slow to 3% in 2022, Xi said China’s gross domestic product exceeded 120 trillion yuan ($17.4 trillion) last year, suggesting the economy had grown by at least 4.4%.
“The Chinese economy enjoys great resilience, enormous potential and great vitality,” Xi said. “The fundamentals supporting its long-term growth have remained strong.”
Economists see a growing possibility of a faster and stronger rebound later in 2023. After the likely slow start to the January-March period, growth is expected to pick up to 4.8% for the year, according to the median estimate of economists surveyed. by Bloomberg.
“It is actually difficult for analysts to provide a reasonable forecast given the uncertainties related to the virus over the past month,” Guotai chief economist Junan International said. Hao Zhou said in a note on Saturday, referring to December manufacturing PMI data. “We believe investors need to look beyond these sentiment numbers and pay attention to high-frequency economic activity data that would provide a measure of post-pandemic recovery.”
Currently, China says it has thousands of new cases per day. But the government’s top health authority estimated that up to 248 million people, or nearly 18% of the population, likely contracted the virus in the first 20 days of December. The result has been overwhelmed emergency rooms and hospital crematoria.
The nation could see up to 25,000 daily Covid-19 deaths in January, according to Airfinity Ltd., a London-based research firm that focuses on predictive health analytics.
“Light of Hope”
“Let us make an extra effort to get out of this, because perseverance and solidarity mean victory,” Xi said of the battle against the virus, adding that “the light of hope is right in front of us.”
Xi is betting an economic rebound this year will help the nation through the shock, officials swear at a recent 24-member meeting Politburo revive consumption and support the private sector.
China’s central bank pledged on Friday to support domestic demand and maintain “effective” credit growth. Monetary policy “will focus on stabilizing growth, employment and prices, as well as supporting the expansion of domestic demand,” the People’s Bank of China said.
The PBOC reiterated that it will provide stronger support to the real economy, keep prices mostly stable and step up targeted stimulus measures for key areas and industries damaged by the pandemic. He also said he would meet the reasonable financing needs of the real estate sector and advance mergers and acquisitions in the sector.
“Given the surge in infections, the economy will experience a difficult period over the next few months before the reopening stimulus begins to take hold – likely in late February or March after the peak of the initial wave,” said said David Qu of Bloomberg Economics. “The data reinforces our view that further policy support will be forthcoming, with the People’s Bank of China likely to cut rates” in the first quarter to help stabilize the economy, he said.
