China suffered a slowdown in its economy during the second quarter of 2022, registering its worst performance since 2020, due to the new health restrictions due to Covid-19 and the crisis of the real estate sector. The world’s second-largest economy had year-on-year growth of 0.4% between April and June, having registered 4.8% in the first quarter, according to official figures from the National Statistics Office (ONE). This is the lowest figure since the first quarter of 2020, when Covid-19 paralyzed activity in China causing a 6.8% drop in Gross Domestic Product (GDP).
This slowdown came after China’s largest city, Shanghai, was confined for two months to contain a Covid-19 outbreak, which affected supply chains and led to the closure of factories. China has insisted on maintaining its zero Covid policy, which aims to eradicate outbreaks of the virus through quarantines and mass testing, which has hit the economy hard. The Asian giant has registered only one economic contraction in recent decades, and analysts expect that with the latest figures, growth for this year will be around 4%, below initial forecasts. If markets expected a retreat, its scope is “a shock,” economist Rajiv Biswas of S&P Global Market Intelligence told AFP. Against this backdrop, it is “hard to believe” in positive growth at the national level during this period, according to Julian Evans-Pritchard, an economist at the Capital Economics cabinet.The epidemic resurgence added to the difficulties already experienced by the Chinese economy: weak consumption, government pressure against several dynamic sectors such as technology, uncertainty linked to the war in Ukraine and a crisis in the real estate sector. In June, new home prices fell again (-0.5% year-on-year), according to the ONE. This is the second month of fall of this index that takes into account the average of prices in 70 cities in China.
On the other hand, “a growing number of buyers stop reimbursing their monthly payments as a result of the economic slowdown and delays” of real estate developers in the progress of the works or the delivery of keys, said economist Betty Wang, of the ANZ bank.
China has set a target for a GDP rise of “about 5.5%” this year, but many economists doubt it will be achieved. This growth figure would be the lowest for China since the early 1990s, with the exception of the Covid period.
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