China premier issues warning on economy as Covid takes toll

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China's premier has called for more action to stabilize the world's second-largest economy, issuing an unusually harsh warning as Covid takes its toll.

Beijing is the last major economy to adhere to a policy of mass testing and hard lockdowns to eliminate virus clusters, but the severe restrictions have harmed businesses.

Recent restrictions across the country, including in the manufacturing hubs of Shenzhen and Shanghai, as well as the breadbasket province of Jilin, have tangled supply chains and dragged economic indicators to their lowest levels in around two years.

According to a readout from the official Xinhua news agency, Premier Li Keqiang told a State Council meeting on Wednesday that the challenges now are "greater than when the pandemic hit hard in 2020."

"We are currently at a critical juncture in determining the economic trend of the whole year," Keqiang added.

"We must seize the time window and strive to bring the economy back onto a normal track."

Li also stated that officials must ensure "reasonable" growth in the second quarter, raising concerns that the country's 5.5 percent annual growth target may not be met.

The Premier's comments are the most recent in a growing chorus of calls from officials and business leaders for a better balance between combating the virus and assisting the struggling economy.

The central bank and banking regulator urged financial institutions to increase lending on Monday, citing economic pressures, Chinese media reported.

At the same time, retail sales fell 11.1 percent year on year in April, while factory output fell 2.9 percent, the worst showing since the early days of the Covid crisis.

The State Council will also send teams to 12 provinces on Thursday to oversee local work in implementing state policies, according to a media report.

It is worth mentioning that the latest company to issue a warning about the impact of strict Covid measures in China was tech giant Baidu, which reported a net loss of $140 million for the January-March period on Thursday.

Exerted efforts to curb Covid-hit economy

The current outbreak in the country, fueled by the Omicron variant, is the worst since the pandemic began in early 2020.

Since April, the financial hub of Shanghai has been almost entirely closed down, crushing businesses, while curbs are creeping in across the capital Beijing with no clear end in sight.

To assist industries, the government has offered tax breaks and a bond drive, and President Xi Jinping has previously called for an "all-out" infrastructure push.

China's economy is a key driver of global growth and is critical domestically for the Communist Party, which has built its legitimacy on consistent growth and rising living standards.