China’s economy witnessed a major slowdown in growth in the second quarter of 2022, according to official data published on Friday, an outcome that is likely to raise fresh questions about the feasibility of the country’s “zero-Covid” strategy which has caused severe economic disruption during this period including a near two-month lockdown of its financial hub Shanghai.
China says its GDP grew by 0.4% YoY in the second quarter.
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According to China’s National Bureau of Statistics data for the quarter ending in June, China’s gross domestic product (GDP) grew a measly 0.4% compared to the same period last year—sharply down from the 4.8% growth figure in the first quarter.
With the exception of a 6.9% decline in GDP in the first quarter of 2020 caused by the start of the pandemic, the 2022 second quarter numbers are China’s worst ever since the current data tracking began in 1992, according to Reuters.
Shanghai was the worst hit region with its economy shrinking 13.7% during the quarter as businesses, factories and offices in the city remained shut and its residents were forced to stay at home for nearly two months as it battled a major Covid-19 outbreak.
The Chinese capital of Beijing, which also witnessed limited restrictions due to an outbreak, saw its economy contract by 2.9% while the economy of Jilin—which also had to endure long Covid lockdowns—shrunk by 4.5%.
Reacting to the poor economic data China’s CSI 300 Index was down 1.70% in afternoon trading while the Shanghai Stock Exchange Composite Index was down 1.64%.
What To Watch For
The 0.4% GDP growth in the second quarter is significantly lower than the 1.0% to 1.2% forecasts made by analysts. The unexpected poor performance in the second quarter likely means that China will miss its annual growth target of 5.5% for 2022, according to Bloomberg.
Earlier this year, China’s largest city and its financial hub witnessed its worst Covid-19 outbreak since the start of the pandemic prompting officials to put the city under lockdown. The lockdown was in line with China’s zero-Covid policy which seeks to completely eliminate the local spread of the virus by using block-by-block quarantines and mass testing. However, the length and severity of Shanghai’s lockdown sent major shockwaves through global supply chains and even led to a rare outpouring of public dissent from the city’s residents who complained of food shortages and arbitrary quarantine measures. China remains one of the few holdouts sticking to the zero-Covid approach and it has prompted some skepticism from international experts and even its own residents. Despite this China’s President Xi Jinping, has strongly backed the strategy saying the country must be prepared to deal with some short-term economic pain instead of “harming people’s… safety and physical health” in the pursuit of a herd-immunity strategy.
China’s economy brakes sharply in Q2, global risks darken outlook (Reuters)
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