Amid crippling “Zero-COVID” lockdowns in China, the Chinese economy showed significant signs of weakening in March.
China’s economy saw a contraction in both domestic consumption and factories activities, official data shows.
The figures come after Beijing’s sweeping COVID-19 lockdowns take their toll across the country.
China’s financial hub Shanghai has for weeks been gripped by an unprecedented city-wide lockdown.
Hundreds of millions of citizens are being forced into lockdown across the country under the Chinese Communist Party’s brutal stay-at-home orders.
Yet analysts say China’s economy is likely to worsen as tough lockdowns drag on.
April 18 data from the National Bureau of Statistics show China’s first-quarter growth perked up as gross domestic product (GDP) expanded by 4.8 percent from a year earlier, beating analysts’ expectations and picking up from the 4.0 percent in the fourth quarter.
Yet a separate statistical release on retail sales and the jobless rate in March took the shine off the growth numbers under China’s highly costly COVID-19 measures.
Beginning in March, a traditionally busy hiring season in China as people come back to work after the Lunar New Year holiday, the country has struggled to curb its worst Omicron-led outbreak thus far, which stemmed from Shanghai and the northeast province of Jilin.
Unlike most other countries which are trying to live with the virus, China rolls out mass testing and stay-at-home orders wherever clusters emerge under a strategy known as “zero-COVID.”
In Shanghai, growing COVID-19 flare-ups has cut off the city’s logistics chains, clogged highways and ports, stranded workers, and shut down countless factories.
Most e-commerce sites have had to suspend new orders for local consumers.
Shanghai has the largest GDP of all Chinese cities, at 4.32 trillion yuan ($680 billion) in 2021, and has the world’s third-largest stock market by market capitalization.
“The economic loss in one day of Shanghai’s full-scale lockdown may go beyond 10 billion yuan [$1.6 billion],” Chinese independent economist Gong Shengli warned.
“The suspension of flows of logistics, people, capital, and production [in Shanghai] is a devastating blow to the economy.”
Retail sales across the country contracted the most in March on an annual basis in the past two years, falling 3.5 percent, compared to a 6.7 percent growth in the first two months.
China’s nationwide survey-based jobless rate in March recorded a ten-month high since May 2020 at 5.8 percent, while the figure in 31 major cities hit 6.0 percent, another record high since 2018.
Industrial production expanded 5 percent from a year earlier, yet down from a 7.5 percent increase seen in the first two months of the year; Fixed asset investment increased 9.3 percent year-on-year in the first quarter, down from 12.2 percent growth in the first two months.
Gong estimated that GDP growth could fall below 4 percent to around 3.5 percent in the second quarter, given that authorities have shown little sign of easing its zero-COVID policy, either in Shanghai where daily new cases surpass 20,000, or elsewhere, portending rising downside risks.
“In terms of macroeconomics, April was probably the toughest time for China,” he said.
“Whether [the current contraction] will ease in May remains a question.”
Beijing’s modest 2022 GDP growth target of 5.5 percent, announced in early March, was also deemed to be “very challenging,” according to Gong, as the first-quarter performance started falling behind.
Such economic disruptions are rippling through the global supply chains affecting goods from electronics to vehicles.
Shanghai authorities have said it’d loosen some curbs amid its nearly three-week-long lockdown.
Officials from the industrial sector have prioritized 666 firms to reopen or keep Shanghai operations going, according to an April 15 statement.
These include Tesla, Volkswagen, and its Chinese partner SAIC Motor, as well as semiconductor and medical firms, according to a list copy seen by Reuters.
Yet most workers will have to live onsite under “closed-loop” management, and there was no clear strategy on how factories will deal with disrupted supply lines and access to markets, with closures ordered by authorities in other cities and port and trucking problems.
Vice Premier Liu He vowed to help key industrial firms that need help recovering from disruptions, state-run news agency Xinhua quoted on April 18.
Late on Friday, China’s central bank said it would cut the amount of cash that banks must hold as reserves for the first time this year, releasing about 530 billion yuan ($83.25 billion) in long-term liquidity.
Meanwhile, Shanghai’s 25 million people have struggled with income losses, lack of food supplies, separation of families, and poor quarantine conditions.