China’s economic growth slowed sharply in the second quarter of the year, expanding 0.4% year-on-year and missing expectations, official data showed on Friday, underscoring the colossal impact on activity from widespread Covid lockdowns that have rocked industrial production and consumer spending.
Gross domestic product (GDP) is forecast to have grown 1 percent in the April-June quarter from a year earlier, according to a Reuters poll of analysts, slowing significantly from 4.8 percent in the first quarter.
On a quarterly basis, GDP fell 2.6% in the second quarter, compared with expectations for a 1.5% decline and a revised 1.4% increase in the previous quarter. For the first half of the year, GDP grew by 2.5%.
Full or partial lockdowns were imposed in major centers across China in March and April, including the commercial capital Shanghai.
While many of those restrictions have since been lifted and data from June offered signs of improvement, analysts do not expect a quick economic recovery. China is sticking to its tough zero-Covid policy amid fresh flare-ups, the country’s property market is in deep decline and the global outlook is worsening.
A Reuters poll forecast China’s growth to slow to 4.0 percent in 2022, well below the official growth target of around 5.5 percent.
The delay comes after China’s largest city, Shanghai, was locked down for two months as it battled a resurgence of Covid-19, snarling supply chains and forcing factories to shut down.
Beijing has embarked on a zero-spread Covid policy to stamp out virus clusters as they emerge, with sudden lockdowns and lengthy quarantines, but it has hit businesses and made consumers nervous.
A delivery man receives a bag of takeaway food next to a block fence in a medium-risk area on June 19, 2022. i Photo: Hugo Hu/Getty Images
“Domestic, the impact of the epidemic continues,” the Office for National Statistics said in a statement on Friday, noting contracted demand and disrupted supplies.
“The risk of stagflation in the global economy is also rising,” the statement added, noting that external uncertainty was rising.
The data comes amid 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 homebuyers are also refusing to pay their mortgages due to concerns that their homes will not be built on time.
Although there are signs that the Chinese economy has started to recover since Shanghai eased restrictions in June, analysts expect that the pressure on consumption is likely to continue.
The news heightens pressure on the Communist Party leadership, which is preparing for its 20th congress, when President Xi Jinping is expected to receive a new five-year term.
With Reuters and Agence France-Presse
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