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The zero-covid strategy, lower exports, the real estate crisis and weak domestic demand are slowing growth in China. Bad news should be avoided during the party congress in Beijing.

In the difficult economic situation in China, the government withheld important data on growth and foreign trade during the Communist Party Congress. In a rare move, the statistical office on Monday surprisingly delayed the announcement of economic development in the third quarter, which was scheduled for the following day. Customs had already postponed the publication of the export and import figures. Reasons were not given.

An employee of the statistics office did not mention a new date. When asked if the postponement was related to the party congress, she replied, “I can’t answer your question.” The second largest economy is currently producing some rather bad news, which also overshadows the deliberations at the current party conference.

Zero Covid Strategy Slows Economy

The zero-covid strategy in particular is slowing the economy, which is also suffering from a severe real estate crisis, high debt and weak domestic demand. As the rest of the world tries to live with the virus, China’s leadership remains committed to nip any outbreak in the bud with lockdowns, mass testing and quarantine. The goal of zero tolerance is becoming increasingly difficult to achieve as new variants spread more easily.

In the second quarter, the economy grew by 0.4 percent. Experts expect 3.5 percent in the third quarter. But the government is likely to fall well short of its growth target of 5.5 percent for the year. The World Bank is counting on 2.8 percent in China. After the first pandemic year in 2020, this would be the second time in four decades that growth has been this low.

“For the first time since 1990, the rest of Asia is growing faster than China,” said Jörg Wuttke, head of the EU Chamber of Commerce in China, based on World Bank estimates. He pointed out that other Asian countries were dealing with Covid in fundamentally different ways and had returned to normal. According to the World Bank, the region excluding China is expected to grow by 5.3 percent.

“Difficulties and Challenges”

Regardless of the economic problems, the head of the Reform and Development Commission, Zhao Chenxin, optimistically addressed the press at the party congress: “The economy really recovered in the third quarter.” He acknowledged this year “difficulties and challenges” and “greater than expected shocks”. There have been monthly fluctuations due to the external environment, the pandemic, extreme weather and other unexpected factors. But overall, China is on the road to recovery.

Of all the glaring problems in China, “zero Covid and how to get out of it” is the biggest, said expert Richard McGregor of Australia’s Lowy Institute. “It just seems to give the economy a hammer blow.” The International Monetary Fund also warned that the crisis in the real estate sector could spill over to banks, companies or local governments.

To stimulate the economy, the Chinese government pumps money into the economy. The central bank has cut interest rates several times. New bank loans almost doubled in September. Unlike in Europe, where inflation is at record highs and interest rates are rising, prices in China have only risen slightly – by 2.8 percent in September compared to the same month last year. (aeg/mlu/awp/sda/dpa)