The covid zero policy that China has maintained since the start of the pandemic is becoming more and more expensive. Its latest bill bears witness to this: in the second quarter of the year, the world’s second largest economy barely grew by 0.4% in annual terms, as the National Statistics Office announced this morning. The actual cost, however, could far exceed government figures.
This last period, from April to June, coincides with the most virulent epidemics recorded in China to date. A situation in which its authorities have imposed confinement at home for two months in Shanghai, the commercial center of the country. Beijing, the capital, also suffered a series of measures for six weeks which, without amounting to official confinement, forced residents into their homes. Many other cities are also living with restrictions that have had a profound economic impact.
For this reason, the limited drop revealed today, Friday, fuels recurring doubts more than ever regarding the authenticity of public figures. “The statistics office ensures that the production of the second quarter was slightly higher than that of a year ago. This is implausible even taking into account the strong rebound shown by the June monthly data,” Julian Evans-Pritchard, China economist at consultancy Capital Economics, said in a report shared today. “This is not the first time that official GDP figures have appeared to underestimate the depth of a recession.”
China records its weakest growth rate in two years, since In the first quarter of 2020, it will pay for the outbreak of the pandemic in Wuhan with a historic collapse of 6.8%. After protecting its borders with a zero-tolerance policy, the Asian giant ended the year with a 2.3% rebound, its worst result in almost half a century but, at the same time, the only world’s largest economy on positive ground.
Today, on the contrary, said strategy represents an inaccessible utopia that keeps the country subject to the virus and threatens to continue to weigh on its economic performance. The 4.8% in the first quarter have already provoked skepticism from analysts. The sum of the two partial yields 2.5% for the first half, which makes it almost impossible to achieve the government objective, set “around 5.5%” at the annual meeting of the regime’s legislative apparatus. last March.
Experts do not predict a rapid recovery despite the withdrawal of the most restrictive measures, since, given the current model, their reimposition is only a matter of time. The detection this week of a new omicron subvariant in Shanghai, for example, has reignited rumors of another lockdown. “Even by massaging the figures a little, it is difficult to see how the government’s objective can be achieved,” predicts the note from Capital Economics. “We expect official GDP figures to reach 3-4% this year, but we believe the reality on the ground will be closer to zero growth.”
The rising cost of the zero Covid policy seems to have sounded the alarm in some sectors within the Communist Party. This unease was personified in the figure of Li Keqiang. The Prime Minister chaired a symposium of experts on Tuesday to “assess the state of the economy” in the face of the “unusual situation experienced in the second quarter of the year”, due to “the severe impact of factors beyond beyond our expectations.”
Already at the end of May, he even called an emergency meeting of the apparatus. Thus, in front of more than 100,000 representatives of all levels of the Administration, Li acknowledged that the difficulties are “to some extent greater than those encountered in 2020 when the pandemic hit the country”.; and stressed the necessary response: “Development remains the key to solving all of China’s problems.”
Maintaining the two priorities at the same time, economic growth and covid-zero, with its consequent requirements, is however a little less than an antithesis. Despite everything, the leader Xi Jinping refuses to abandon a strategy that once became a source of legitimacy for the regime, the validity of which he reiterates at each public intervention. “Perseverance is victory,” he proclaimed during an official visit to Sichuan province last month.
Other monthly indices released today invite a more optimistic reading in the short term. Industrial production increased by 3.9% per year in June against 0.7% in May. Retail sales rebounded 3.1% after declines of 6.7% and 11.1% in May and April respectively. Investment in fixed assets, for its part, increased to 6.1%.
The urban unemployment rate, an unrepresentative method that does not include large pools of migrant workers, fell to 5.5% from 5.9% in May. For those under 25, on the other hand, it rises to 3l 19.3%.
On the other hand, the customs figures published yesterday maintain the trend of the previous months: high exports and falling imports. The former rose 17.9%, its fastest pace since January. The latter, however, gains barely 1%, a ratio that casts doubt on the solidity of its evolution. The Chinese economy is thus paying for an increasingly costly Covid-zero policy, even if its exact price remains a mystery.