Photo credit: AP Photo/Kin Cheung
The Chinese economy has been on a rollercoaster ride for the past few years. Its performance was incredibly disappointing as it recorded one of its lowest growth rates, and this is attributed to periodic Covid lockdowns that have periodically shut down significant parts or all commerce within China’s borders.
As China carries out an emergency response to contain the spread of Covid, its economic hubs have been closing and opening depending on authorities’ regulations.
The Chinese economy has been slowing down for some time now. This is not surprising, considering the country’s GDP only increased by 0.4% within three months, according to the National Bureau of Statistics.
The data from the last quarter shows a drastic difference compared to what was recorded during the latest quarter. The last quarter saw a 4.8% increase.
Down by 2.6%, the GDP of China is feeling the effects of the lockdowns.
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The country’s economic performance has been on a downward spiral for some time now. The first major downturn came during the Covid outbreak in Wuhan last 2020, where all business and general operations came to a standstill causing the GDP to shrink by 6.8%.
The Chinese government has projected an economic expansion of 5.5%. However, current conditions make it difficult for the country to reach its target. In fact, the expansion that the authorities recorded only reached 2.5%.
The National Bureau of Statistics spokesperson, Fu Linghui, said, “There are challenges to achieving our expected economic growth target for the whole year.” However, Fu said with confidence that the economy may still have a chance to recover during the second half of the year.
Several factors contribute to the economic downturn
Many factors are hindering China’s economic goals for this year. One of the main reasons is the strict zero-Covid policy within their country, which prevents businesses from fully recovering and achieving success, as well as social protests happening across several areas throughout China. All these things have made it difficult to reach the benchmarks authorities expect to achieve on time.
The fight against Covid has been integral to maintaining China’s citizens’ safety. However, the strict measures undertaken by authorities have hindered necessary industries that keep the stability of the Chinese economy, leading it to perform the worst in years.
The Chinese government’s recent decision to reopen the economy has significantly affected businesses in terms of both recovery and uncertainty. Businesses felt that things were going well until they heard about new measures being taken by Beijing, which caused them great concern for their prospects as well – especially with youth unemployment at 19.3%
A global market strategist from JP Morgan Asset Management, Chaoping Zhu, said that the latest quarter and its outcome “reflected the significant shocks from the Omicron outbreak and corresponding stringent measures adopted in major cities.”
“Looking forward, we expect to see continued economic recovery in the second half of this year, mainly supported by government-led infrastructure investment,” he added.
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With the economy worsening and people’s lives being inconvenienced due to these Covid restrictions, Chinese authorities should ease them so that both consumer confidence and business outlook will improve, added Zhu.
The Chinese economy shows minor signs of stability and growth, but it’s not enough. With a goal of 5% growth this year, according to Larry Hu from Macquarie Group, the country needs to record a 7% increase in GDP during the second half of the year.
The property sector has been hit hard by the recent economic slump, with investment dropping 9.4% in June last year alone. The plunge is an addition to the 7.8% drop it experienced a month before.
Hu said, “The property woe is causing rising social instability, evidenced by the recent mortgage boycott.”
Zhu from JP Morgan Asset Management said, “Decisive and effective regulatory measures must be taken to prevent the mortgage boycott from developing into a systemic risk.”