Without a decisive abandonment of the zero-Covid policy, China faces considerable risks of a growth slowdown in the second half of this year, making Beijing’s 5.5 per cent growth target a tall challenge, economists say.

Nomura, a leading Japanese investment bank, said the world’s second-largest economy could be stuck in a “Covid business cycle” (CBC), where policymakers are determined to achieve zero Covid, while avoiding disastrous economic consequences.

“Beijing has both the capability to carry out a zero-Covid strategy and the capacity to boost demand when its economy stumbles, but China’s CBC may occasionally have external implications due to the sheer size of China’s economy. The CBC has material implications for both economic fundamentals and financial assets,” warn Nomura’s economists, led by chief China economist, Ting Lu. Their China growth forecast is at 3.3 per cent.