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Covid wreaks havoc on China’s economy more than expected

China’s April economic data reflects the massive damage the lockdowns took.

According to data released today (May 16) by the National Bureau of Statistics of China, retail sales decreased by 11.1% in April compared with the same period in 2021. This number was much lower than the forecast of a decrease of 6, 1% according to the survey of Reutersand also much lower than the 3.5% drop in March.

While industrial production in March increased by 5%, in April it decreased by 2.9% compared to April 2021. This marked the deepest decline in industrial production since February 2020, when Covid-19 appeared.

Unemployment last month also rose to near-record levels. The urban unemployment rate hit 6.1% in April, up from 5.8% in March, which was already at a 21-month high. The record for the urban unemployment rate in this country was recorded in February 2020.

Asian stock markets were gloomy after China released weak data. Hong Kong’s Hang Seng Index closed today up only 0.26%. Meanwhile, China’s Shanghai Composite and South Korea’s Kospi fell 0.34% and 0.29%, respectively.

Medical staff walk along the fence of a blockade area in Shanghai on March 28.  Photo: Reuters

Medical workers walk along the fence of a blockade area in Shanghai on March 28. Photo: Reuters

Before these figures, Shanghai yesterday launched a plan to lift the blockade to return to more normal life from June 1. Vice mayor Zong Ming said Shanghai will reopen in phases. In the immediate future, the city will start reopening supermarkets, convenience stores and pharmacies from this week.

However, the majority of movement restrictions will remain in place until May 21 to prevent a resurgence of the virus. From May 22, bus services will gradually resume, but people will have to present a negative test certificate no later than 48 hours to use public transport.

“From June 1 to mid and late June, as long as the risk of disease outbreaks is controlled, we will fully implement epidemic prevention and control work, normalize management, and fully restore production and the normal life of the city,” said Ms. Zong Ming.

The blockade of Shanghai, China’s most populous city with 25 million people, left no cars for sale last month as dealerships closed. City-based China Eastern Airlines said April passenger numbers also fell by 90.7 percent.

China’s economy got off to a good start in early 2022, recording 4.8% growth in the first quarter. But Beijing’s efforts to contain the wave of the Covid-19 outbreak have dealt a heavy blow to China’s economy. active since March.

According to the latest calculation of CNNAt least 31 cities are still under full or partial lockdown. Shanghai, the country’s financial and manufacturing hub, has been locked down for more than six weeks. During this time, many companies were forced to shut down for a while before gradually recovering, such as Tesla, Volkswagen and iPhone assembler Pegatron.

“We think second-quarter GDP growth is likely to be negative. The government faces increasing pressure to roll out new stimulus measures to stabilize the economy,” said Zhiwei Zhang, President and CEO. Chief economist at Pinpoint Asset Management, said.

Chinese officials are aware of the difficulties and have taken several steps to support the economy. The People’s Bank of China on Sunday (May 15) announced it would cut interest rates for first-time mortgage borrowers. This move is seen as aimed at improving the weakening real estate market. The Shanghai government alone said that the city will gradually reopen shops and restaurants from this week.

The Chinese government recently pledged to boost the economy through more infrastructure spending and targeted monetary easing to support small businesses. However, “risks to the outlook are tilted to the downside, as the effectiveness of policy stimulus will largely depend on the size of future Covid outbreaks and lockdowns,” said Tommy Wu, House of China’s leading economists by Oxford Economics, review. The expert forecasts GDP of the world’s second largest economy will grow by 4% this year. In which, GDP will decrease in the second quarter before increasing again in the second half of the year.

Session An (according to CNN)

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