Major cities across country in full or partial lockdowns

The Chinese economy is feeling the hurt from its zero-COVID policy, resulting in the economy contracting sharply in the second quarter of this year.

The economic contraction has come about as widespread coronavirus lockdowns hit businesses and consumers. The BBC is reporting that gross domestic product (GDP) fell by 2.6 per cent in the three months ended June from the previous quarter.

This has occurred as major cities across China, including the major financial and manufacturing centre Shanghai, were put into full or partial lockdowns, as the country continues to pursue its ‘zero-COVID’ policy.

“Second quarter GDP growth was the worst outcome since the start of the pandemic, as lockdowns, notably in Shanghai, severely impacted activity at the start of the quarter,” Tommy Wu, lead economist at Oxford Economics, told the BBC.

Official figures for last month showed an improvement in the country’s economic performance after many of those curbs were lifted.

“However, June data was more positive with activity picking up after most of the lockdowns were lifted. But the real estate downturn continued to drag on growth,” Wu explained.

CHINA MISSES ANTICIPATED 1% GROWTH

On a year-on-year basis, the world’s second-largest economy expanded by 0.4 per cent in the April-June quarter, missing expectations of one per cent growth. The country’s once-booming property market is in a deep slump and the outlook for the global economy has weakened sharply in recent months.

Meanwhile, Jeff Halley, senior market analyst for Asia Pacific at trading platform Oanda, told the BBC that he also saw some bright spots in today’s economic data from China, pointing out that, “GDP was worse than expected, however unemployment fell to 3.5 per cent and retail sales outperformed impressively”.

According to Halley, “financial markets are likely to concentrate on the retail figures, which appear to show the Chinese consumer in better shape than expected”.

However, many analysts do not expect a quick economic recovery for China as the government continues with its strict zero-COVID approach to slowing the spread of the coronavirus.