China’s economy slows sharply, fanning global recession fears

Second quarter expansion of 0.4 percent is the weakest performance since the initial coronavirus outbreak in Wuhan.

Published On 15 Jul 202215 Jul 2022

China’s economy grew at the slowest pace since the start of the COVID-19 pandemic in the second quarter, highlighting the punishing economic toll of Beijing’s stringent “dynamic zero COVID” strategy.

The world’s second-largest economy expanded just 0.4 percent year on year between April and June, official data showed on Friday, as lockdowns across the country stifled industrial production and consumer spending.

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The meagre expansion was the worst performance since the first quarter of 2020, when China’s economy shrank 6.9 percent after authorities imposed the first COVID-related lockdowns in the city of Wuhan.

The result, which was well below market expectations, comes amid rising fears that the world could slip into recession as the war in Ukraine, supply chain disruptions, and rising interest rates cloud the outlook for growth.

“The data was weaker than expected, with most analysts expecting around 1 percent,” Carlos Casanova, senior economist for Asia at UBP in Hong Kong, told Al Jazeera.

“We were below consensus, as we expected the decline in China’s housing sector to drag on aggregate demand, reducing the likelihood of a sharper rebound in consumption in June.”

Casanova said he expected growth in 2022 to remain below 4 percent.

Despite the weak overall performance, industrial output and retail sales both rebounded strongly from previous lulls.

Industrial output grew 3.9 percent in June compared with a year earlier, up from 0.7 percent in May, according to data released on Friday.

Retail sales rose 3.1 percent, beating economists’ forecasts and registering the quickest growth in four months.

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Fixed-asset investment, which includes investments in property, land, machinery and equipment, grew 6.1 percent in the first half of the year, compared with a 6.2 percent jump in January-May.

Major cities, including the commercial capital Shanghai, were put into lockdown in March and April, as part of a “zero COVID” policy that seeks to eliminate the virus at almost any cost.

While officials have since lifted many of the harshest curbs, new restrictions affecting millions of people have been introduced in recent weeks in Xian, Lanzhou, Haikou, Macau, and Anhui province.

Despite the mounting economic and social toll, Chinese President Xi Jinping has promised to maintain the country’s zero-tolerance approach, stressing the need to “put people and life at the forefront”.

China has set an economic growth target of about 5.5 percent for 2022, which economists widely believe Beijing will struggle to reach.

“Given the second quarter figure, it is very likely the Chinese government needs to lower its annual target, because it needs more than 8 percent growth for the second half to achieve the 5.5 percent target,” Alicia García-Herrero, chief Asia Pacific economist at Natixis in Hong Kong, told Al Jazeera.

SOURCE: AL JAZEERA AND NEWS AGENCIES

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