The bone strict lockdowns imposed in china as part of covid zero policy weighed heavily on its economy in the second quarter. The Asian giant’s gross domestic product (GDP) rose only 0.4% year on year between April and June, its lowest level in two and a half years, following the closures decreed in various regions of the country and , especially in Shanghai, the national financial heart and where is the largest cargo port in the world. Official data published this Friday by the National Statistics Office (ONE) is more pessimistic than those predicted by experts – who expected growth of 1% – and show a rapid slowdown compared to the first three months of the year. , when GDP grew by 4.8%.
China is the only major economy on the planet that continues to cling to maintaining a zero tolerance strategy against covid-19, which involves lockdowns, massive testing and border closures. Although thanks to these measures, the country managed to contain infections for almost two years, since the entry of omicron on its territory in February 2022, advocating to keep the number of infections to a minimum with a much more contagious variant has been a major challenge. The negative impact of this policy on travel, the supply chain and consumption precipitated the economic downturn in the spring months. The figures provided on Friday show China’s worst performance since it began publishing them in 1992, except for the -6.7% rise it experienced in the first quarter of 2020, coinciding with the outbreak of the pandemic in Wuhan.
Despite these downward pressures, ONE spokesman Fu Linghui said on Friday that the second quarter showed positive growth. Fu said China’s economy recorded “a stable recovery” after the country adopted “strong measures to counter the impact of unforeseen factors”. This assessment refers to the improvement of certain indices in June, when some of the coronavirus protocols began to be relaxed. Industrial production rose 3.9% year on year (vs. 0.7% in May) and retail sales rebounded 3.1%, after falling 6.7% the previous month and rising 11 .1% in April.
While the unemployment rate in cities stood at 5.5% in June, compared to 5.9% in May and 6.1% in April, the rise in unemployment among young people aged 16 to 24 is particularly alarming, which reached a record figure of 19.3%. “The jump in retail sales is quite surprising… I don’t know if it can last long because the labor market is quite weak at the moment,” warns Nathan Chow of DBS Hong Kong.
ONE also facilitated economic growth in the first half, which increased to 2.5%. The data represents a huge slowdown from the 12.7% reached in the first half of 2021, although at that time the statistics benefited from a comparison with the first half of 2020, when the virus was first officially detected. .
“At the national level, the impact of the pandemic persistsONE said in its statement. The draconian shutdown of Shanghai – which accounts for 5% of the national GDP – for two months saw the country’s main business city experience a year-on-year contraction of 13.7% of its GDP in the second quarter. That of Beijing, meanwhile, fell by 2.9% over the same period.
Given the “volatile and uncertain” situation, the Government has set a growth target for this year “around 5.5%”, figure that analysts question can reach. “Even with a bit of data manipulation, it’s hard to believe that China will hit the 5.5 target,” Julian Evans-Pritchard, chief economist at Capital Economics, said in a note. “That would require a huge ramp-up in the second half of this year, which is unlikely,” he adds. The recent appearance of the highly contagious BA.5 subvariant of omicron in some cities – and the subsequent imposition of lockdowns to control its spread – is increasing uncertainty among business owners and consumers.
The data presented this Friday increases the pressure on the Communist Party, which is about to hold its 20th Congress in the fall, an appointment during which President Xi Jinping should be re-elected for an unprecedented third term. “Looking forward, we expect the economy to pick up ahead of Congress, thanks to increased stimulus and easing of COVID-19 control policies,” said Li Wei, senior economist at Standard Chartered Shanghai. “As a result, we maintain our forecast of 4.1% growth for 2022,” he adds.
Last Thursday, Premier Li Keqiang said the foundations for China’s recovery were “still unstable” and demanded “to be more effective” when it comes to “combining covid prevention with development.” economic”. At the end of May, the Chinese premier had already surprised by asking provincial leaders to ease the measures, a move that some experts interpreted as a sign of his disagreements with Xi, who in his statements has always given priority to the zero covid strategy. .