China’s economic growth plummets after Covid shutdowns | Chinese economy

China’s economic growth slowed sharply in the second quarter of the year, official data showed on Friday, underscoring the colossal toll of widespread Covid lockdowns and casting doubt on whether its predetermined growth target will be met.

Output contracted 2.6% between April and June from the previous quarter, the statistics office said, prompting many economists to revise their forecasts for the world’s second-largest economy.

On an annual basis, the economy grew 0.4% in the second quarter, the worst since the early pandemic-stricken months of 2020, but even that was worse than economists’ consensus forecast of 1%.

Consultancy Capital Economics said the real figure was likely “even lower than it looks” and suggested the Chinese government – used to reporting growth far outpacing Western countries – could try to hide the sluggishness of the economy.

“Even with a little number massage, it’s hard to see how the government’s target of growth “around 5.5%” this year can be achieved. This would require a huge acceleration in the second half of this year, which is unlikely,” Chinese economist Julian Evans-Pritchard said in a note on Friday.

While noting some strong signs of a recovery in retail sales for example, Evans-Pritchard said growth “is expected to remain relatively weak over the coming quarters.”

“We expect official GDP figures to show 3% to 4% growth this year, but we believe the reality on the ground will be closer to zero growth for the year as a whole,” he said. he declared.

The signs showed that the economy was slowing down. Figures this week showed imports for the second quarter rose just 0.1%, which one economist called “unbelievably” low given that prices of key imports such as oil and foodstuffs have exploded since April.

A more significant sign is the latest unemployment data, economists said. The statistics bureau reported on Friday that youth unemployment had risen to 19.3%, a trend accelerated by full or partial shutdowns imposed in major centers across China in March and April, including the commercial capital, Shanghai.

“For China, it’s a societal problem,” said Alicia García-Herrero, Hong Kong-based chief Asia-Pacific economist at bank Natixis. “A lot of people are going to ask themselves now: where is my future? It kind of breaks their ‘Chinese dream’. It’s a key issue now.

Serena, a 26-year-old English teacher in the southern city of Zhuhai, finally found a job this month after two years of searching. “For two years I have been fighting. It was very competitive and extremely difficult if you want to teach in public schools, ”she told the Guardian. “And the salary turned out not to be as it had been promised.”

Given China’s insistence on zero Covid and the recent discovery of the highly transmissible sub-variant of Omicron BA.5, many analysts do not expect a quick economic recovery. Moreover, the country’s real estate market is in a deep recession and the global outlook is darkening.

The slowdown comes after China’s biggest city, Shanghai, was locked down for two months as it battled a resurgence of Covid-19, tangling supply chains and forcing factories to halt operations.

Analysts expect the pressure on consumption to persist. Photography: Hugo Hu/Getty Images

Beijing has set foot on a zero Covid policy of stamping out virus clusters as they emerge with instant lockdowns and lengthy quarantines, but that has hurt businesses and kept consumers nervous.

“At the national level, the impact of the epidemic persists,” the statistics office said in a statement on Friday, noting a drop in demand and disrupted supplies. “The risk of stagflation in the global economy is increasing,” the statement said, noting that external uncertainties are growing.

Sign up for the daily Business Today email or follow Guardian Business on Twitter at @BusinessDesk

The data comes after growing challenges in China’s key real estate sector, which by some estimates accounts for a quarter of gross domestic product, with weak home sales in recent months.

A growing number of home buyers are also refusing to pay their mortgage, fearing that their home will not be built on time. This week, a documentary about how hundreds of home buyers in China’s central city of Xi’an had to live in unfinished apartments struck a chord with many Chinese buyers.

Although there are signs that China’s economy has started to recover since Shanghai eased lockdown restrictions in June, analysts expect pressure on consumption to persist.

The news is mounting pressure on the leadership of the Communist Party, which is preparing for its 20th Congress, when President Xi Jinping is expected to be given a new five-year term.

Additional reporting by Xiaoqian Zhu, Reuters and Agence France-Presse

Back To Top