Coronavirus jolts China’s economy, triggers rethink on wide economic spectrum

With the China’s coronavirus showing no signs of slowing down, Beijing is preparing to take steps to adjust to a slower rate of economic growth with officials pondering whether economic growth targets for 2020 should be softened.

According to sources familiar with the matter at hand, state-owned liquefied natural gas importers are considering declaring themselves unable to fulfill some obligations on cargo deliveries, known as force majeur. Authorities in Beijing are also hoping that Washington will show some flexibility on China’s pledges in the Phase-1 trade deal, said sources close to the situation.

Two-thirds of China’s economy will continue to remain closed this week with several provinces extending the Lunar New Year holiday to help curb the spread of the coronavirus that has so far claimed 425 lives.

China typically announces its annual growth target in March following a legislative session which endorses decisions taken by Beijing’s top leaders at the yearly closed-door Central Economic Work Conference in December.

Economists had expected China would aim for a projected GDP of “around 6%” in 2020. Economists at Bloomberg opine, economic growth could slip to 4.5% in the current quarter.

According to sources, among the measures being considered by Beijing to shore up the economy, are selling more special government bonds. Officials could also increase the planned cap on the ratio of the budget deficit to GDP, said sources.

Sources prefered not to be identified discussing the private talks.

Any changes to the growth target would have to be approved by top leaders of the Communist Party.

Social stability

At a rare meeting of top leaders, Chinese President Xi Jinping called on all officials to collaborate in order to contain the spread of the coronavirus, saying the outcome would directly impact social stability in the country.

The effort to contain the spread of the virus has a direct bearing on the people’s health, China’s prospects of opening up its economy and the country’s economic and social stability, said Jinping at a meeting of the Communist Party’s powerful Politburo Standing Committee. Leaders also urged officials “to achieve the targets of economic and social development this year” and “promote stable consumer spending.”

The meeting assumes significance since it was the second such meeting of China’s senior-most leaders to handle its coronavirus crisis in recent days; it is a rare occurrence over the past few decades.

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