China’s economy shrinks sharply in Q2, global risks darken outlook
China’s economy contracted sharply in the second quarter, highlighting the colossal toll on activity from widespread COVID lockdowns and pointing to persistent pressure over coming months from a darkening global growth outlook.
Friday’s data comes at a time of fears of a global recession as policymakers jack up interest rates to curb soaring inflation, heaping more hardship on consumers and businesses worldwide as they grapple with challenges from the Ukraine war and supply chain disruptions, Reuters reports.
Gross domestic product fell 2.6% in the second quarter from the previous quarter, official data showed, compared with expectations for a 1.5% decline and a revised 1.4% gain in the previous quarter.
On a year-on-year basis, GDP in the April-June quarter grew a tepid 0.4%, missing forecast of a 1.0% gain, according to a Reuters poll of analysts, a sharp slowdown from 4.8% in the first quarter.
For the first half of the year, GDP grew 2.5%, well below the government’s target of around 5.5% growth for this year.
“China’s economy has stood on the edge of falling into stagflation, although the worst is over as of the May-June period. You can rule out the possibility of a recession, or two straight quarters of contraction,” said Toru Nishihama, chief economist at Dai-ichi Life Research Institute in Tokyo.
“Given the tame growth, China’s government is likely to deploy economic stimulus measures from now on to rev up its flagging growth, but hurdles are high for PBOC to cut interest rates further as it would fan inflation which has been kept relatively low at present.”
Full or partial lockdowns were imposed in major centres across the country in March and April, including the commercial capital Shanghai, which saw a year-on-year contraction of 13.7% in GDP last quarter.
While many of those curbs have since been lifted, and June data offered signs of improvement, analysts do not expect a rapid economic recovery. China is sticking to its tough zero-COVID policy amid fresh flare-ups, the country’s property market is in a deep slump and the global outlook is darkening.
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.
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