China GDP: Q2 2022 records the slowest growth rate since 2020’s Covid

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The gross domestic product is the The second-largest economy in the worldExpanded By just The National Bureau of Statistics (NBS), Friday, reported that 0.4% of the three months ended June 30 was lower than the same period last fiscal year.

It was a sharply smaller increase than the 4.8% it recorded in the previous quarter. This was also far less than the 1% growth that economists estimated in Reuters poll. On a quarterly basis, GDP shrank 2.6%.

It was the worst performance Since the beginning of 2020, when China’s economy has been growing steadily The situation was so bad that it almost reached a standstillAs it struggled to contain an initial coronavirus virus outbreak that broke out in Wuhan. In that quarter, GDP fell 6.8%.

The economy grew by 2.5% for the first half, which is well below the government’s 5.5% annual target. Beijing acknowledged Friday that it will be difficult for the country to achieve its GDP goals in this year’s first half.

“There are some challenges Fu Linghui, a spokesperson of the NBS, stated that we will achieve our economic growth target for the entire year at a Beijing press conference. However, he expects the economy to recover in the second half.

Mounting challenges

Chinese policymakers face increasing challenges in maintaining growth. China is facing a steep slowdown in activity as a result of Beijing’s strict zero Covid policy. It also faces a harsh regulatory crackdown and a real estate crisis.Banks facing increasing bad debts And Social protests are on the rise
Beijing’s uncompromising approach to eliminating the virus has led to months-long lockdowns in many cities across the country since March. Shanghai, the country’s financial and shipping center. Millions of residents were forced to live in their homes. Shops, restaurants, and factories were all closed. hammering consumer activitySupply chain disruptions
Authorities started Reopening the economyAt the beginning of last month, restrictions were lifted in key cities. Manufacturing and services have both been affected. Showed signs of improvementIn recent weeks. Beijing’s firm stance on zero-Covid has created uncertainty for investors and dampened investor sentiment. Consumer spendingStill weak, while the job market is under significant pressure — youth unemployment hit a new record high of 19.3% in June.
Xi'an shuts back down as China finds first cases of new Omicron subvariant

Fu spoke at a press conference Friday to say that the economy had taken an “unexpected and severe” hit by both domestic as well as external factors.

Imported have been affected by higher global commodity prices, particularly food and energy. Inflation. Fu stated that China’s economic stability is also at risk from rising stagflation risks in the rest of the world.

“The poor performance in the 2nd quarter reflects the shocks from Omicron and corresponding strict measures adopted in major urban areas,” Chaoping Zhu, a global market strategist for JP Morgan Asset Management, Shanghai.

“We expect continued economic recovery in 2012’s second half, largely supported by the government,” said “Looking ahead, we expect to see an economic recovery continue in 2013” Infrastructure investment by the governmentHe said that consumers could be more confident if Covid restrictions are relaxed by the government. Your bounce back rate is faster
China's shoppers are still on strike and youth unemployment is rising

Zhu indicated that there may be a downside to growth in the property industry.

Larry Hu, Macquarie Group’s chief China economist, stated that the latest data suggest that the GDP growth must accelerate to over 7% in half-time to achieve 5% annual growth.

He said, “It is impossible to do it without a significant escalation in policy stimulus levels from the current level.”

Property slump drags

Friday’s economic data contained some positive signs.

Manufacturing and mining saw 0.9% growth compared to the second quarter of last year. Due to a surge in car sales, which was fueled by increased demand, retail sales in June rose 3.1% compared with a year ago. Support for electric vehicles in the policy. In June, industrial production rebounded by 3.9% compared to a year earlier.

However, the huge real estate sector is still a major problem.

Macquarie Capital calculated based on government data showed that property investment declined 9.4% from a year prior to June. After a 32% drop in May, property sales by floor area fell 18% last month.

Chinese homebuyers refuse to pay mortgages on unfinished apartments

Hu said that slumping sales meant developers were facing a liquidity crunch.

“The property woes are causing rising social instability, as demonstrated by the recent mortgage boycott,” said he.

In desperate times, homebuyers in dozens of cities have stopped paying mortgages on unfinished houses over the past few days. As a result, a growing number project are being held up by a cash crunch. Evergrande, a giant developer, defaulted last year on its debt. Many other companies have sought protection from creditors.

Zhu of JP Morgan Asset management stated that there is a growing risk for banks’ financial health due to the unfinished homes.

“Decisive, effective regulatory actions must be taken in order to prevent the mortgage bankruptcy from becoming a systemic danger,” he stated.

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