The Covid-19 lockdowns in two of China’s most significant cities, Beijing and Shanghai, has caused China’s economy to plunge dramatically in the second quarter. This sets the government’s annual economic goals further out of reach.
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According to official figures, the second-largest economy in the world grew by 0.4 percent in the three months leading up to June compared to the same period last year.
It was much below economists’ predictions and the weakest expansion since GDP shrank by 6.8 percent in the first three months of 2020, just as the pandemic was beginning.
A survey estimated second-quarter growth to be 1 percent, while other survey expected it to be higher at 1.2 percent.
Between January and March, China’s growth was 4.8 percent. The second quarter’s underwhelming results reduced the first half of this year’s overall expansion to 2.5 percent.
With forecasts now reduced to 4 percent, experts predict that China’s overall GDP this year will fall short of the government’s target of “around 5.5 percent.”
According to Dr. Larry Hu, head of China economics at Macquarie Group, policymakers will now have to settle for “around 5.5 percent” growth in only the second half of this year.
The National Bureau of Statistics’ spokesman and director-general of its Department of Comprehensive Statistics, Mr. Fu Linghui, warned that the route to economic recovery is fraught with dangers, such as the pandemic’s lingering effects and disrupted supply chains.
The threat of stagflation is also growing. This is a result of the economy growing slowly while also experiencing increasing unemployment and inflation. Urban unemployment as measured by the poll decreased slightly from May’s 5.9 percent to 5.5 percent in June.
“(The latest) data suggests that the economy is on the mend, but it remains very weak. The loss from lockdowns is huge, while the property sector is in deep trouble,” said Dr Hu, Macquarie.
Expansion has also been hampered by the struggling property industry, which makes up approximately 20 percent of the GDP.
Following a 7.8 percent decline the previous month, real estate investment declined 9.4 percent in June over the same period last year. After a 32 percent decline in May, sales modestly rebounded in June, dropping 18 percent from a year earlier.
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“This is worrying as the stress (from the property sector) could spread to the financial sector and households if not managed properly and quickly,” said Zhang.