China narrowly misses second-quarter contraction as zero-Covid
China’s economy narrowly escaped a contraction in the second quarter as the fallout from President Xi Jinping’s zero-Covid policy stoked expectations that Beijing would inject hundreds of billions of dollars of stimulus to shore up growth.
The world’s second-biggest economy expanded 0.4 per cent year on year in the three months to the end of June, below the 1.2 per cent forecast by economists, and down from the 4.8 per cent recorded in the first quarter.
The slowdown reflected the hit from a two-month lockdown in Shanghai, which took full effect in April, and illustrated the threat to global growth from Xi’s attempt to eradicate Covid-19 in the world’s main manufacturing hub.
The National Bureau of Statistics figures were released at a tense juncture for Xi’s economic planners. Beijing’s battle to eradicate coronavirus outbreaks has relied on months of snap lockdowns and heavy-handed restrictions on mobility, dragging on the pace of China’s economic recovery.
The 0.4 per cent result marked China’s second-worst quarterly growth figure in 30 years, following a contraction at the start of the pandemic. With first-half growth at 2.5 per cent, Beijing is expected to miss its target of about 5.5 per cent annual growth for 2022, itself a three-decade low.
“These data highlight the unfavourable domestic and external circumstances that, in tandem with the government’s zero-Covid strategy, are squeezing economic activity and emphasise the dire need for short-term policy measures to revive growth,” said Eswar Prasad, economics professor at Cornell University and former head of the IMF’s China division.
He added that while investment growth had held up “better than expected”, it entailed “a slew of medium-term fiscal and financial risks”.
Adding further pressure on Xi’s administration, youth unemployment rose to a record of 19.3 per cent.
Thirty-one Chinese cities are under full or partial lockdowns, affecting 247.5mn people in regions accounting for about 17.5 per cent of the country’s economic activity, according to an analysis released this week by Japanese investment bank Nomura.
Xi’s administration has consistently said it would prioritise protecting the country from coronavirus outbreaks over the economy. It has blamed the country’s slowdown on the pandemic, the risks of stagflation and monetary tightening globally.
Fu Linghui, a spokesperson for the NBS, conceded reaching Beijing’s 5.5 per cent growth target this year would now be “challenging”.
“Generally…
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