China’s economic growth slows sharply due to the impact of COVID policy

China’s economy grew this spring at its slowest rate since the start of the coronavirus pandemic, a sharp slowdown from Covid-19 policy that continues to lead to widespread lockdowns and mass quarantines, bringing some business to a halt.

The National Bureau of Statistics said Friday that the economy grew 0.4 percent from a year earlier in the second quarter, the lowest growth rate since the first three months of 2020. That was when the country effectively shut down to fight the early stages of the 2020 pandemic, and its economy contracted for the first time. Once 28 years ago.

The economic downturn in 2020 was short-lived, with the Chinese economy recovering almost immediately. But the current forecast is not promising. Unemployment is close to an all-time high. The housing market remains in disarray, and small businesses are bearing the brunt of the weakness in consumer spending.

The slowing economy is a political problem for China, which is trying to show unshakable strength and stability during the year it is scheduled to hold its Communist Party Congress. Xi Jinping, the country’s leader, is expected to move to another five-year term.

A booming economy and the promise of rising wealth fueled China’s rise, and it’s part of the bargain Chinese citizens accept in return for living under authoritarian rule. But the lockdowns, a key component of Beijing’s policy on the non-proliferation of the coronavirus, have raised the risks of instability – both socially and economically.

“China is the unprecedented shoe in the global economy,” said Kenneth Rogoff, Harvard economics professor and former chief economist at the International Monetary Fund. “China is not in a position to be the global engine of growth right now, and the long-term fundamentals point to much slower growth in the next decade.”

In May, Li Keqiang, the premiere in China, called an emergency meeting and sounded the alarm about the need to boost economic growth to more than 100,000 corporate and local government officials. The stark warning cast doubt on China’s ability to reach its previous growth target of 5.5 percent for this year.

Measures taken to combat excessive borrowing by real estate developers, combined with Covid restrictions, exacerbated a slowdown that could have global repercussions. Last month, Nike said revenue and profit fell in its most recent fiscal quarter, with sales to China down 19%.

The most recent economic crisis hit it in April and May, when Shanghai, China’s largest city, went into a lockdown for nearly two months and the effect spread through the economy. Office buildings have been closed, and workers have been ordered to stay home. Across China, hundreds of millions of consumers have closed down – leaving stores, restaurants and service providers to run without customers.

Zheng Jingrong, a shop owner in Beijing that sells imported handmade clothes, said she usually sold 150 to 200 pieces of clothing within a month before the epidemic broke out. In May, it sold 20 of its regular customers, she said, and people are generally reluctant to check out. The epidemic has been every year “worse than the previous year”. Cheng said.

The problem is not limited to her clothes. Ms. Cheng said more than 300 stores operated in the same neighborhood as her shop in Gulu, a maze of streets and alleys that once teemed with food stalls, cafes and bars. It estimated that 20 percent of these businesses were closed or closed.

“Because China has started to boom and develop since the 1980s, its economy has always been on the rise,” the lady said. Zheng, who has been running the shop for 15 years. “Now it is clearly declining.”

The government said retail sales, an indicator of how much consumers are spending, fell 4.6 percent from a year earlier in April through June.

And even as the economy improved in June, the threat of more mass quarantines could derail this nascent recovery. This week, the cities of Xi’an, Lanzhou and Haikou imposed partial lockdowns, restricting several million residents by shutting down nonessential businesses and imposing mass testing.

Japanese securities firm Nomura estimated that as of Monday, 247 million people in 31 cities were under some kind of lockdown in China, covering about a fifth of the country’s population and representing the equivalent of about $4.3 trillion in annual gross domestic product. . The number of affected cities nearly tripled from the previous week.

Beijing has urged local authorities to step up measures to ensure job stability during the lockdown. However, with many small and medium-sized businesses struggling financially, the government has struggled to deal with rising unemployment.

As of June, the unemployment rate was 5.5 percent — an improvement from April and May but close to the highest level since China began reporting numbers in 2018. For job seekers aged 16 to 24, which includes college graduates Newcomers, the unemployment rate was greater. Three times higher at 19.3 per cent.

James Foe quit his job last month as a landscape designer for a real estate developer – a stressful job he’s grown to hate. But now he’s dealing with the anxiety of finding a job in a tough job market, especially in real estate.

the master. Fu, 28, said there are fewer jobs available at real estate companies because companies have been struggling financially or using the downturn to justify cutting staff and costs. Because the job pool has shrunk, he said, one’s insurance requirements have gone up. He said a job he might have gotten in the past with two to three years of experience now requires five to 10 years, with the same salary.

said mr. Fu, who lives in Chengdu, Sichuan Province. “This year could be particularly difficult. I think it has been even more difficult since the pandemic started.”

Besides the high unemployment rate, there are emerging signs that weakness in the real estate market could be a major problem for the Chinese government this year. Measures to curb property speculation have sent the sector into a debt spiral, sending new home prices down for the first time in years and shaking the confidence of consumers, many of whom have invested family savings in real estate.

Resentment is growing among people who bought homes before they were built. According to state media, more homebuyers are refusing to pay their mortgages, upset with delays in construction as well as falling home prices.

Citigroup analyst Griffin Chan wrote in a note to clients on Wednesday that buyers of 35 projects in 22 cities have decided to stop paying their mortgages. This has put real estate companies in a bind: If they shy away from paying clients for not paying their mortgages, it could result in “social instability,” the master said. Chan said.

Claire Vogue Contribute to research.

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