China’s gross domestic product rose 4.8 percent in the three months to March 31 from the same period last year, according to the National Bureau of Statistics on Monday. This was faster than the 4% increase registered by the world’s second-largest economy in the previous quarter.
Growth was supported by surprisingly good economic performance in January and February, with several indicators ahead of analysts’ forecasts over the past two months.
Retail sales fell 3.5% in March from a year earlier, the first drop since July 2020. Industrial production rose 5% in March from 7.5% in the first two months of the year.
“Economic development is facing many difficulties and challenges now,” NBS spokesman Fu Linghui told a news conference in Beijing on Monday.
The Covid outbreak in March disrupted production in some regions and damaged consumption, Fu said. In particular, catering, tourism and transport services were severely affected.
Unemployment has risen as a result of the “treacherous shock”, he said.
Unemployment in 31 major cities rose to 6% in March, a record high. Among people aged 16 to 24, unemployment reached 16%, its highest level in eight months.
The goal of growth seems lofty
The Chinese government has set a target for growth of about 5.5% this year, the lowest in three decades. But the Covid epidemic, combined with the war in Ukraine – which has raised oil and commodity prices – has already made it seem inaccessible to many economists.
“Economic data will deteriorate further in April,” wrote Larry Hu, chief economist for Greater China at the Macquarie Group, on Monday. He expects growth for the year to be around 5%.
Some analysts even talk about the risk of the economy reversing in the current quarter, as the ongoing crisis in Chinese real estate puts even more pressure.
“Activity data is expected to fall sharply in April as the risks of a recession in the second quarter increase,” analysts at Japan’s Nomura investment bank wrote on Monday.
“Beijing’s GDP growth target is [about] 5.5% is becoming more challenging this year and we now see significant risks of reducing our annual GDP growth forecast of 4.3%, “they added.
Blockade leaves economy in distress
Shanghai is the epicenter of Covid’s current epidemic, but it’s not the only one – Nomura estimates that 45 Chinese cities have full or partial blockades, affecting a quarter of the country’s population and about 40 percent of the economy.
In a bid to ease the disruption, the Chinese government released a “white list” of 666 companies on Friday that will be allowed to resume production. Nearly 40% are car manufacturers or companies involved in the supply of the automotive industry. It is unclear when these companies will be able to resume production.
China’s Zero Covid strategy is still a major risk to China’s economic prospects.
“In fact, the economy is in trouble,” analysts at Societe Generale said on Monday. “The problem, as we have repeatedly emphasized, is blocking – still in place and still spreading.
Over the past week, Chinese Premier Li Keqiang has repeatedly warned of the threat that the increase in Covid cases poses to growth and employment. Last Wednesday, he promised more interest rate cuts to boost the economy. Two days later, the People’s Bank of China announced a reduction in the ratio of required reserves – which dictates the amount of money that banks must keep in their reserves – a move aimed at stimulating lending.
– The Beijing Bureau of CNN contributed to this report.
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