China’s economic growth has slowed sharply in the second quarter of the year, expanding 0.4% year-on-year and missing expectations, official data showed on Friday, highlighting the colossal toll on activity from widespread Covid lockdowns, which jolted industrial production and consumer spending.
Gross domestic product (GDP) had been forecast to expand 1% in the April-June quarter from a year earlier, according to a Reuters poll of analysts, slowing significantly from 4.8% in the first quarter.
On a quarter-on-quarter basis, GDP fell 2.6% in the second quarter, compared with expectations for a 1.5% decline and a revised 1.4% gain in the previous quarter. For the first half of the year, GDP grew 2.5%.
Full or partial lockdowns were imposed in major centres across China in March and April, including the commercial capital, Shanghai.
While many of those curbs have since been lifted, and June data offered signs of improvement, analysts do not expect a rapid economic recovery. China is sticking to its tough zero-Covid policy amid fresh flare-ups, the country’s property market is in a deep slump, and the global outlook is darkening.
A Reuters poll forecast China’s growth to slow to 4.0% in 2022, far below the official growth target of about 5.5%.
The slowdown comes after China’s biggest city, Shanghai, was sealed off for two months as it battled a Covid-19 resurgence, tangling supply chains and forcing factories to halt operations.
Beijing has dug its heels in on a zero-Covid policy of stamping out virus clusters as they emerge with snap lockdowns and long quarantines, but this has battered businesses and kept consumers jittery.
“Domestically, the impact of the epidemic is lingering,” the National Bureau of Statistics said in a statement on Friday, noting shrinking demand and disrupted supplies.
“The risk of stagflation in the world economy is rising” as well, the statement added, noting that external uncertainties were growing.
The data comes in the wake of mounting 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 homebuyers are also refusing to pay their mortgages over worries their homes will not be built on time.
Although there are signs that China’s economy has started to recover since Shanghai eased lockdown restrictions in June, analysts expect that pressure on consumption will probably persist.
The news piles pressure on the Communist party’s leadership, which is gearing up for its 20th congress, when President Xi Jinping is expected to be handed another five-year term.
With Reuters and Agence France-Presse
July 15, 2022 at 09:07AM Staff and agencies