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China's GDP shrank in Q2 as a result of global threats

Image: Reuters Berita 24 English -The massive impact of widespread COVID lockdowns , which shocked industrial production and consumer spendi...

Image: Reuters

Berita 24 English -The massive impact of widespread COVID lockdowns, which shocked industrial production and consumer spending, on activity was highlighted by China's economy's severe second-quarter contraction and poor annual growth.

According to official figures released on Friday, the gross domestic product decreased by 2.6 percent in the second quarter compared to the prior quarter, exceeding forecasts of a 1.5 percent fall and a corrected 1.4 percent rise in the prior quarter.

According to a Reuters poll of analysts, GDP expanded a meagre 0.4 percent from April to June compared to the same period last year, significantly slowing down from the first quarter's 4.8 percent growth rate.

GDP increased by 2.5% over the first six months of the year.

In March and April, complete or partial lockdowns were implemented in important cities all around the nation, including Shanghai, the nation's commercial centre.

Although many of those restrictions have now been removed and June's data showed signs of improvement, analysts do not anticipate a quick revival of the economy. China is maintaining its strict zero-COVID policy despite recent flare-ups, the nation's real estate market is in a severe depression, and the outlook for the world is becoming more gloomy.

Businesses and customers are more worried about a protracted period of uncertainty as a result of the implementation of additional lockdowns in some locations and the appearance of the highly contagious BA.5 variety.

Although economists claim it will be difficult to attain China's official growth target of about 5.5 percent this year without abandoning its stringent zero-COVID plan, the country has been stepping up governmental assistance for the economy.


Data on activity in June indicated that although it was less than the 4.1 percent increase that analysts had predicted in a Reuters poll, China's industrial output increased by 3.9 percent in June compared to a year earlier.

On the other side, after authorities removed a two-month lockdown in Shanghai, retail sales increased 3.1 percent from a year earlier in June, which was the fastest gain in 4 months. After May's 6.7 percent decline, analysts had projected a 0 percent increase.

Fixed asset investment increased by 6.1 percent in the first half of the year compared to the same period last year, falling short of the forecasted 6.0 percent increase and the 6.2 percent increase in January-May.

As the economy recovered, the employment situation improved, with the overall survey-based unemployment rate decreasing to 5.5 percent in June from 5.9 percent in May.

As more customers stop making mortgage payments nationwide until builders resume building pre-sold homes, a fledgling recovery in China's capital-starved real estate market is being eclipsed.

According to data released on Friday, housing prices decreased by 0.5 percent from a year earlier, worsening from a 0.1 percent decline in the previous month, and monthly growth also stalled.

After declining by 4.0 percent in the first five months of the year, China's real estate investment decreased by 5.4 percent in the first half of the year.

On Wednesday, the central bank promised to maintain reasonable liquidity levels and cut funding costs, but also anticipating a brief increase in total debt as part of efforts to resuscitate the economy.

On Friday, it also renewed maturing medium-term policy loans while maintaining the same interest rate for a sixth consecutive month.

Analysts believe that while the U.S. Federal Reserve rapidly raises interest rates to combat skyrocketing inflation, the central bank's ability to loosen policy even further may be constrained by concerns about capital outflows.

Although not as rapid as elsewhere, China's growing consumer prices might still place additional restrictions on the loosening of monetary policy. Numerous analysts predict that consumer inflation will increase and reach 3 percent in the upcoming months, but that the average level for the entire year will remain within the yearly target range of 3 percent or less.

According to a Reuters poll, China's growth would decline to 4% in 2022, which is significantly less than the country's official growth objective of roughly 5.5 percent.

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