How does China fight economic stagnation with the spread of the Corona virus?

China intends to implement a package of economic measures, to extricate the second largest economy in the world from its stumble, which it suffered – recently – due to the spread of the Corona virus – again – in the country.

The expected measures include tax exemptions and incentives to attract foreign investments, and mitigate the negative effects of the Corona pandemic on the economic and social development rates in the country.

And China closed many cities, with the return of the spread of the Covid-19 virus in the country, with the aim of eliminating the virus, which contributed to achieving economic stagnation in many industries, most notably the electric car industry, as major car companies take Chinese cities as a headquarters for manufacturing and exporting abroad. .

Positive performance of electric car stocks

Electric car shares rose in a positive session on the Hong Kong Stock Exchange – the second largest financial exchange in Asia – with the support of the meeting of China’s top decision-making body, which sent a strong signal to investors of government support for the economy.

The “New” stock – which is listed on the Hong Kong Stock Exchange – witnessed a rise of 6.96%, Xping Motors’ share jumped, by 5.61%, and Lai Auto’s share rose by 7.08%.

China's plan to fight economic recession
Electric cars in China – archive

And the Chinese electric car maker, “Neo”, announced on April 9 that it had suspended production in its factories, after the measures – taken by the Chinese government to control the outbreak of the latest wave of the Corona virus – caused the company’s suppliers to stop working.

The “Hang Seng Index” in the Hong Kong Stock Exchange rose by 3.34%, while the Hang Seng Technology Index rose by 8.45%, and Alibaba’s share rose by 13%, and Baidu’s share jumped by 8.28%.

Economic and social protection

The Political Bureau of the Communist Party of China held a meeting on April 29, to analyze and study the current economic situation.

The meeting stressed the need for the Chinese government to control the coronavirus epidemic, achieve economic stability, and secure development, according to the state-owned Xinhua News Agency.

The meeting called on the Chinese government to limit and eliminate the spread of the fourth wave of the Corona virus, while achieving economic and social protection in light of the spread of the new mutation, to protect people’s lives and health, and reduce the impact of the pandemic on economic and social development.

The meeting called on China to increase regulatory policies, achieve economic stability, strive to achieve the expected goals of economic and social development this year, and maintain good growth rates, according to CNEV Post.

The Chinese government should speed up the implementation of the policies that have been set, and issue stimulating measures to the economy such as tax exemptions and cuts, lowering fees, and making good use of the various tools of monetary policy.

The meeting urged China to make every effort to increase domestic demand, allow active investment to play a major role in the economic wheel, and promote infrastructure development in all fields.

The meeting called on the Chinese government to ensure the smooth flow of transportation and logistics, and the normal operation of major supply chains and infrastructure.

According to the meeting, the country should respond to market concerns in a timely manner and maintain the smooth operation of the money market.

The Political Bureau of the Communist Party of China called on the government to adopt a policy of openness to the outside world, respond to the demands of foreign companies, and create an atmosphere for foreign trade and foreign investment.

In addition to Hong Kong stocks, the Shanghai Composite Index is up 2%, and the Shenext Index is up 3%.
The yuan, which has suffered sharp declines recently, rose in overnight trading on Friday, April 30, to 6.64 against the dollar.

Unexpected growth rates

The Chinese economy grew by 4.8% during the first quarter of this year, compared to 4% in the last 3 months of 2021, despite the deterioration of real estate sales and the imposition of closures in dozens of cities.

The real estate sector and the demand for raw materials represent 20% of China’s GDP, which means that economic growth rates in other sectors must range between 7 and 8%, to achieve the growth rates announced by the government, which is not likely in light of the growth rates achieved before The spread of the epidemic, according to statements by the head of China markets at the Rhodium Group, and Logan Wright to Bloomberg.

China aims to achieve a growth rate of 5.5% during the current fiscal year, while the International Monetary Fund reduced its forecast for the country’s GDP growth to 4.4% from 4.8% in January 2022, and 5.6% in October.

It is expected that the demand for gasoline, diesel and jet fuel in China will decline by 20% during the month of April, which is equivalent to a decrease in crude oil consumption by 1.2 million barrels per day.

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