Shanghai, hit by COVID, heads for exit from lockdown, but China still lost in economic gloom

  • Shanghai set to lift COVID-19 lockdown on June 1
  • Government officials express concern about the broader economy
  • Analysts expect more aggressive economic support soon

BEIJING, May 26 (Reuters) – Shanghai, China’s pandemic-hit financial hub, unveiled further post-lockdown plans on Thursday as it heads for a return to normal, but economic recovery is still a long way off, which reinforces the sense of urgency for more support.

China’s largest city by economic output has suffered from the lockdown imposed in early April. Other cities not on lockdown but still locked down by COVID restrictions, including Beijing, have also struggled, with the highly transmissible Omicron prompting stronger responses from health authorities this year.

With the government refusing to relax its zero-tolerance stance on COVID, factories and businesses have been bruised by the disruption caused by shutdowns, endless mass testing and mobility restrictions on large swaths of the population.

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Shanghai is expected to finally come out of its lockdown on June 1 after the sharp drop in new infections. The megacity of 25 million people has cautiously allowed more of its population to venture out and put more vehicles back on its once-busy streets and boulevards.

City officials said Thursday that middle and high school students could return to offline classes starting June 6, after learning earlier in the week that malls and department stores would be allowed to reopen, though in batches, from June 1st.

ECONOMIC TROOPS

As attention turns to recovery, Premier Li Keqiang on Wednesday offered a bleak view of the world’s second-largest economy, saying the difficulties it faces in some ways were even greater than in 2020, when the China was first affected by the COVID-19 outbreak. .

Many private sector economists expect gross domestic product to contract in April-June year-on-year from 4.8% growth in the first quarter.

China will strive to achieve “reasonable” GDP growth in the second quarter, Li told thousands of government officials across the country in an online conference.

“The unusual meeting caps a series of increasingly urgent official statements in recent days in an attempt to resolve the economic disruption caused by the wave of COVID-19 lockdowns,” research group Gavekal Dragonomics wrote in a note Thursday.

“The urgent high-level focus on stabilizing growth opens the door for more aggressive stimulus measures to be rolled out in the weeks ahead.”

Underscoring the tension between economic policies and COVID and the sensitivity surrounding their discussion, social media sharing of state television reporting on Li’s teleconference has been intermittently blocked on China’s heavily guarded internet.

Some online groups on the popular Chinese mobile app WeChat have also banned the sharing of unverified transcripts – audio or written – of the conference as well as discussions of the event, fearing their accounts will be suspended.

BUSINESS CONFIDENCE

“Macroeconomic confidence in China has now deteriorated to the point where what is needed is not easing around the edges of these broad policy priorities, but wholesale policy reversals,” JPMorgan said in a commentary.

The central bank said on Thursday it would encourage more credit for small businesses and urged financial institutions to prioritize lending to central and western regions, as well as areas and sectors hammered by outbreaks. of COVID.

The finance ministry also said on Thursday it would offer subsidies to Chinese airlines from May 21 to July 20 to help weather the coronavirus-induced slowdown and rising oil prices.

Domestic air traffic plummeted due to shutdowns in Shanghai and surrounding cities. Shanghai-based China Eastern (600115.SS) said passenger numbers fell 90.7% in April from a year earlier. Read more

Overall passenger air traffic fell nearly 85% year-on-year last month and stood at just 15% of its pre-COVID level in 2019, China’s air regulator said on Thursday. aviation.

Offering a glimmer of hope, the China Passenger Car Association said on Thursday that domestic vehicle sales rose 34% in the first three weeks of May compared with the corresponding period of April. Read more

But, with COVID outbreak control measures dragging down revenue, sales volume was still 16% lower than 12 months ago, the industry association warned.

Road freight and express delivery from fulfillment centers last week were both stronger than a month earlier, but still down sharply from the year, Nomura Global Economics said.

“Until China relaxes its COVID policy, any other policy measures are of little value at this time,” said an auto fastener factory owner named Zheng in the eastern province of Zhejiang.

“Everyone has little confidence or enthusiasm to invest now.”

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Reporting by Ryan Woo, Stella Qiu, Winni Zhou, Yan Zhang, Ellen Zhang and Brenda Goh; Editing by Raju Gopalakrishnan and Gareth Jones

Our standards: The Thomson Reuters Trust Principles.

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