The world’s second largest economy had a increase year-on-year of 0.4% between April and June, after registering 4.8% in the first quarter, according to official figures released on Friday by the National Statistics Office (ONE).
This is the lowest figure since the first quarter of 2020, when Covid-19 paralyzed activity in China, causing a 6.8% drop in Gross Domestic Product (GDP).
Zero Covid Policy Costs
The deceleration came after China’s largest city, Shanghaiwas confined for two months to contain an outbreak of Covid-19, which affected supply chains and caused the closure of factories.
China has insisted on maintaining its policy of zero covidwhose objective is to eradicate outbreaks of the virus through quarantines Y massive testswhich has hit the economy hard.
“The risk of stagflation in the world economy is also increasing,” he added in the statement, which indicated that external uncertainties are growing.
China has recorded only one economic contraction in recent decades, and analysts expect that with the latest figures, growth for this year will be around 4%, below initial forecasts.
“Shock” for the markets
If the markets expected a withdrawal, its scope is “a shock”, economist Rajiv Biswas, from the cabinet, told AFP S&P Global Market Intelligence.
Shanghai suffered a precipitous fall in the second quarter, as its GDP contracted 13.7% year-on-year.
Against this background, it is “hard to believe” in positive growth at the national level during this period, according to Julian Evans-Pritchard, a cabinet economist. Capital Economics.
The outbreak of the epidemic added to the difficulties that the Chinese economy was already experiencing: weak consumption, pressure from the government against various dynamic sectors such as technology, uncertainty linked to the war in ukraine and a real estate crisis.
China and the real estate crisis
In June, the prices of new homes fell again (-0.5% year-on-year), according to the ONE.
This is the second month of decline in this index, which takes into account the average prices in 70 Chinese cities.
On the other hand, “a growing number of buyers stop reimbursing your monthly payments as a result of the economic slowdown and delays” of the real estate developers in the progress of the works or the delivery of keys, stressed the economist Betty Wang, of the ANZ bank.
This aspect of the housing crisis is “worrying” because it threatens the Finance systemwarned the economist Zhiwei Zhang, from the Pinpoint Asset Management cabinet.
Regarding unemployment, the rate was 5.5% in June against 5.9% in May. However, it increased strongly among the youngest, the 16-24 year old group (19.3%).
China has set a GDP growth target of “about 5.5%” for this year, but many economists doubt it will be achieved.
This growth figure would be the lowest for China since the early 1990s, with the exception of the Covid period.
Source: Ambito
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