Data heighten fears of a global recession
China’s economic growth slowed sharply in the second quarter, highlighting the colossal impact of widespread lockdowns against covid-19 and pointing to persistent pressure in the months ahead in the face of an increasingly bleak global backdrop.
This Friday’s (15) data adds to fears of a global recession as authorities raise interest rates to curb inflation, amplifying the difficulties for consumers and businesses around the world, while also facing the challenges of the Ukraine war and problems in supply chains.
China’s gross domestic product (GDP) grew just 0.4 percent between April and June from a year earlier, according to official data. That was the worst performance for the world’s second-largest economy since the data series began in 1992, excluding a 6.9 percent contraction in the first quarter of 2020 due to the initial pandemic shock.
China’s economy also marked a sharp slowdown from the 4.8 percent growth recorded in the first quarter. In the quarterly comparison, GDP fell 2.6 percent in the second quarter from the previous period, against expectations of a decline of 1.5 percent and revised high of 1.4 percent in the previous quarter.
“China’s economy has been on the verge of falling into stagflation, although the worst is over in the May-June period. The possibility of a recession, or two straight quarters of contraction, can be ruled out,” assessed Toru Nishihama, chief economist at the Dai-ichi Life Research Institute.
“Given the weak growth, it is likely that China’s government will implement economic stimulus measures from now on to reverse the weak performance, but the obstacles are high for the People’s Bank of China to reduce interest rates further, as it would fuel inflation that has been kept relatively low at the moment.”
In March and April full or partial lockdowns were, adopted in major Chinese centers, including the commercial capital Shanghai, which had an annual GDP contraction of 13.7 percent in the second quarter. Output in the capital Beijing decreased by 2.9 percent from the same quarter a year earlier.
Although many restrictions have since been lifted and June data show signs of improvement, analysts do not expect a rapid economic recovery. China is sticking to its tough zero covid policy amid new surges, the country’s property market is in a deep recession, and the global outlook is worsening.
The imposition of new lockdowns in some cities and the arrival of the highly contagious BA.5 variant have heightened concerns among businesses and consumers about a prolonged period of uncertainty.
In the first half of the year, China’s GDP grew 2.5 percent year-on-year.
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