BEIJING - China’s growth slumped sharply in the second quarter, smothered by Covid-19 lockdowns in key cities Beijing and Shanghai – pushing the government’s economic goals for the year even further out of reach.
The world’s second-largest economy expanded by 0.4 per cent in the three months to June, compared with a year ago, according to official data.
It was the smallest expansion since the economy contracted 6.8 per cent in the first three months of 2020, early on in the pandemic – and far below the expectations of economists.
Those polled by Bloomberg had forecast second-quarter growth to come in at 1.2 per cent, while a Reuters survey put it at 1 per cent.
China’s growth between January and March was 4.8 per cent.
The lacklustre performance in the second quarter pulled down overall expansion in the first six months of this year to 2.5 per cent.
This is despite Beijing stepping up its investment in national infrastructure development projects by 6.1 per cent between January and June to boost growth.
Experts believe China’s overall growth this year will fall short of the government’s goal of “around 5.5 per cent”, with expectations now revised to 4 per cent.
Policymakers will now have to content themselves with achieving “around 5.5 per cent” growth in only the second half of this year, said Dr Larry Hu, head of China economics at Macquarie Group.
Mr Fu Linghui, spokesman for the National Bureau of Statistics and director-general at its Department of Comprehensive Statistics, told reporters that the path to economic recovery is beset with threats, including the lingering impact of the pandemic and disrupted supply chains.
Another threat is the rising risk of stagflation, he said. This is brought about by slow economic growth simultaneous with higher unemployment and inflation.
Mr Zhang Zhiwei, chief economist at Pinpoint Asset Management in Hong Kong, said “the fear of Covid-19 outbreaks continues to hurt consumer and corporate sentiment”.
The detection of the highly infectious Omicron BA.5 sub-variant in several cities, including Xi’an and Dalian, has raised fresh fears of lockdowns.
Shanghai discovered a local infection with the BA.5.2.1 sub-variant this week.
China is the world’s last remaining economy to keep to a strict zero-Covid-19 approach, even as other countries relax curbs.
Shanghai’s gross domestic product (GDP) fell by a staggering 13.7 per cent in the April-to-June quarter from a year ago, as the financial hub reeled from a two-month lockdown that started in April, the latest data showed.
Beijing, which had a semi-lockdown in May before rules were relaxed last month, saw its GDP fall by 2.9 per cent in the second quarter from a year ago.
Retail sales, which contracted 6.7 per cent year on year in May, picked up in June with a 3.1 per cent increase from a year ago.
The surveyed urban jobless rate also showed a slight improvement in June, at 5.5 per cent compared with May’s 5.9 per cent.
Macquarie’s Dr Hu said: “(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.”
The country’s beleaguered property sector, which accounts for about 20 per cent of the economy, has also dragged on expansion.
Property investment fell by 9.4 per cent year on year in June, after dropping 7.8 per cent the month before. Sales improved slightly, falling 18 per cent in June from a year ago, after a 32 per cent drop in May.
Mr Zhang said: “This is worrying as the stress (from the property sector) could spread to the financial sector and households if not managed properly and quickly.”
