China may not reach 5.5 pc projected economic growth, amid Ukraine crisis, COVID resurgence

Shanghai [China], March 24 : China might not be able to reach its recently announced ambitious goal of 5.5 per cent economic growth in 2022, in the wake up of the Russia-Ukraine war and a resurgent COVID-19 pandemic.
Eva Dou and Christian Shepherd, writing in The Washington Post said that there is widespread uncertainty over the strength of the economy in the face of a resurgent pandemic, an often draconic regulatory crackdown and China's ambiguous position on Europe's biggest conflict since World War II.
In a reversal of optimism about pandemic-beating Chinese stock performances that until recently had been a draw for foreign capital, doubts remain about whether China can hit its ambitious target.
Causes of the uncertainty over the economy include both domestic factors -- the unclear intensity of Chinese President Xi Jinping's regulatory crackdown and the worst outbreak of coronavirus since 2020 -- as well as external shocks such as the possibility of a rift with the West.
There has been the threat of sanctions on China if it provides economic or military aid to Russia amid the already steep turmoil in global markets from President Vladimir Putin's invasion of Ukraine, said Dou and Shepherd.
Last year, as part of his reforms, the Chinese Communist Party signalled a sharp turn toward "common prosperity" with crackdowns across society to focus on redistributing wealth, curbing unfair competition and reining in excess debt in bubble-prone sectors like real estate development, reported The Washington Post.
In the embattled real estate sector, Chinese regulators promised to stabilize prices and announced a delay to a property tax trial that was expected to further shake things up.
On top of uncertainty about the direction and speed of Xi's reforms are fears that China's attempts to stay out of Putin's war on Ukraine will ultimately crumble.
Beijing claims to be neutral, but economists warn that its failure to criticize the invasion and pledges to continue normal economic ties with Russia, an important strategic partner, could undermine its relationship with more significant trading partners including the European Union, United States, Australia and Japan, said Dou and Shepherd.
Such concerns come on top of long-standing issues from US-China disputes over trade and technology, including the possibility of Chinese stocks in the United States being delisted over auditing scrutiny from American regulators -- a threat that accelerated last week's sell-off of US-listed Chinese stocks.
Moreover, how the Ukraine war will impact China's relations with its trading partners is among the largest sources of unpredictability, because it's not clear what the global economy will look like after the war, said Nancy Qian, an economics professor at Northwestern University's Kellogg School of Management.
On Sunday, the Chinese ambassador to Russia Zhang Hanhui encouraged Chinese businesses in Russia to seize opportunities presented by the current crisis and adjust their business models to fill "gaps" in the Russian market, another tilt in the delicate balance China is trying to walk.
But, many Chinese firms are either reluctant or unable to increase business with Russia in part due to fears of secondary sanctions, reported The Washington Post.
Soaring global energy and food prices caused by the war will add to economic headwinds for China, a major importer of commodities such as oil, gas and wheat, unless Beijing is able to buy these products at pre-war prices from Russia, according to Shang-Jin Wei, a scholar at Columbia Business School.
Combined with projected US interest rate increases this year, shocks from the war could create lower growth and higher uncertainty in other parts of the world that "would translate into a lower demand for Chinese exports, which is a net negative for the Chinese growth," Wei said.