Chinese Think Tank: "Even a 4% Growth Rate This Year Would Be a Good Performance"

Variables such as COVID Resurgence... Consumption Must Recover
Youth Unemployment Resolution Difficult... 5.5% Target Hard to Achieve

Zhubao Liang, Chief Economist at the China National New-type Urbanization Center

[Asia Economy Beijing=Special Correspondent Jo Young-shin] Due to lockdown measures in major cities such as Shanghai, China's gross domestic product (GDP) for April and May is estimated to have recorded negative growth of -2.2% and -0.5% respectively compared to the same months last year. As a result, voices have emerged even from Chinese think tanks stating that achieving this year's economic growth target (around 5.5%) will be difficult.

Zhu Baoliang, Chief Economist at the China National New Infrastructure Center, attended the Korea-China Economic Forum hosted by the Korea Institute for International Economic Policy (KIEP) Beijing Office, and stated that unexpected situations such as the resurgence of COVID-19 after the March Two Sessions (National People's Congress and Chinese People's Political Consultative Conference), the Russia-Ukraine war, rising international raw material prices, and inflation concerns in major countries including the United States are impacting the Chinese economy.

The China National New Infrastructure Center is a think tank under the National Development and Reform Commission (NDRC) and serves as an economic research institute that attends and advises economic trend meetings chaired by Chinese leadership including Premier Li Keqiang.

Chief Economist Zhu diagnosed that among various domestic and international sudden variables, the resurgence of COVID-19 has had the greatest impact on the Chinese economy, and that it may take some time for the economy to recover.

He explained that the difficulty and cost of quarantine measures differ from those during the initial COVID-19 outbreak in Wuhan in 2020, which accounts for the slow pace of economic recovery. Due to the characteristics of the fast-spreading Omicron variant, the proportion of quarantine costs in GDP reaches 1.5%. He also added that with the 20th Party Congress scheduled for this fall, quarantine measures are being further strengthened, which will affect human and logistics movement.

He pointed out that the biggest problem is consumption. He explained that China's consumption growth rates for March, April, and May were -3.5%, -11.1%, and -6.7% respectively compared to the previous year, and that consumption in China decreased by 1.5% year-on-year through May of this year. He expressed concern about youth unemployment among those aged 16 to 24. As of the end of May, the unemployment rate for this age group reached 18.4%, the highest figure since related statistics began to be compiled. He emphasized that if consumption does not revive, the unemployment problem in this age group will not be resolved.

He said that unlike other countries such as the United States, China's consumer price index (CPI) remains low due to insufficient consumption. In fact, as of the end of May, China's core inflation index rose by only 1.1%.

Chief Economist Zhu stated, as his personal opinion, that if China's economy achieves more than 4% growth on an annual basis this year, it would be considered a good performance. He also pointed out that India and Vietnam are emerging as export countries replacing China, and that industrial adjustments are necessary.