Chinese activity collapsed at 0.4% in the second quarter of 2022. In question, the severe containment measures imposed in the main cities of the country.
Correspondent in Beijing
China pays the bill for Omicron at a high price. The world’s second largest economy saw its activity collapse by 0.4% in the second quarter, close to contraction under the impact of the severe containment measures imposed in Shanghai and in the main cities of the country, according to official statistics released by Beijing, Friday July 15. The country’s largest metropolis even recorded a brutal contraction of minus 13.7%, after two months of merciless confinement imposed on its 26 million inhabitants in the spring, closing surrounding factories and disrupting global supply chains.
These figures are below economists’ already pessimistic forecasts and mark the sharpest slowdown since the first quarter of 2020, when the world’s factory recorded a contraction, at the time of the blockade of Wuhan. This is a sharp decline compared to the 4.8% growth of the first quarter, bringing expansion to 2.5% over the first half of the year, indicated the National Bureau of Statistics (BNS) while that President Xi Jinping clings to a “zero covid», against a background of growing uncertainties about global growth.
The 5.5% growth target uncertain
“The international environment has become more complex and harsh, and the epidemic has struck the country frequently, causing severe impacts“, recognized the BNS in echo with the war of Ukraine and the diffusion of the variant omicron. However, the official press highlights the resilience of the economy which “stabilized and rebounded», a few months before a Party Congress, decisive for the future of the most authoritarian leader since Mao. This performance makes the annual objective all the more uncertain “about 5.5%» targeted by the communist regime for the year 2022, despite timid signs of recovery in June.
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Retail sales rebounded by 3.1% last month, stemming the dramatic fall in consumption during the lockdowns, and industrial production by 3.9% benefiting from the gradual lifting of restrictions, giving a breath of fresh air to the activity.
This quarterly performance below expectations is explained by the continued weakness of the real estate market, the traditional engine of Chinese growth, judge Dan Wan, chief economist at Hang Seng bank. “Growth is well below expectations as epidemic control measures have worsened an already sluggish real estate market. Buyers are hesitant to take action as they fear new developers will take a plunge too“Judges the economist based in Shanghai. Property giant Shimao announced it was in debt default earlier this month, adding to juggernaut Evergrande’s woes, further stoking anxiety. In June, prices in the sector continued to contract by 0.5% over one year, confirming the mistrust of the market.
economic support measures
Beijing is increasing measures to support the economy and credit by resorting to the usual expedients, in particular infrastructure, but this mobilization is struggling to translate on the ground due to growing budgetary constraints. “Local governments are worried about their level of debt and are therefore more selective in choosing projects“Judge Dan Wang. If consumption has resumed, it remains timid and threatened by the risk of new confinements which hangs like a sword of Damocles over Shanghai, or Guangdong, where the number of Covid cases is on the rise again.
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Growing tensions with the United States, investor mistrust and the prospect of a global recession are so many clouds hanging over the horizon of the world’s factory, which is more dependent than ever on its exports, which still remain dynamic. “China’s economy will continue to rebound in the second half, to achieve a performance of a reasonable ranksaid Yuan Da, the government’s chief planner, at the National Development and Reform Commission (NRDC). An elliptical unquantified formula suggesting that Beijing was mourning the objective of 5.5% annual growth.
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