China economic data disappoints as lockdown effects persist By

© Reuters.

by Gina Lee – China’s economic activity in April 2022 as the COVID-19 lockdown hit consumption, industrial production and employment hard, fuelling fears that the economy may contract in the second quarter.

Data released by the National Bureau of Statistics (NBS) earlier in the day showed a year-on-year increase of 6.8%. It decreased by 2.9% year-on-year and increased by 4% year-on-year.

April 2022 is down 11.1% YoY and 6.1% YoY.

Although Premier Li Keqiang said in March that China was aiming to create more than 11 million jobs in 2022, preferably 13 million urban jobs, he recently said that due to China’s worst COVID-19 outbreak since Epidemic, China’s employment situation is “complex and severe” 2020.

This led to full or partial lockdowns in dozens of cities in March and April, including a prolonged lockdown in Shanghai. Nie Wen, an economist at Hwabao Trust, told Reuters that the lockdown, along with a prolonged test in Beijing, had raised concerns about economic growth for the rest of the year.

“If COVID containment measures only affect the economy in April and May, GDP growth of around 5% is still possible this year. But the virus is very contagious and I’m still concerned about future growth.”

Other investors were not convinced, with ING analysts expecting economic growth to contract by 1% in the second quarter from a year earlier, and Nomura saying the Chinese economy has faced a growing risk of recession since mid-March.

Capital Economics now forecasts China’s full-year growth rate of just 2%, saying even that is not guaranteed if COVID-19 cannot be contained. “Even if the current virus wave is subdued, COVID-19 containment measures will continue to dampen activity to some extent in the coming quarters.”

It added that despite repeated pledges by policymakers to provide more support for the slowing economy, stimulus so far has been “ineffective”, with only a small reduction in policy rates.

Financial authorities also said on Sunday that they would allow banks to lower the floor on home loan rates based on the corresponding period of the prime rate for first-time home buyers. The People’s Bank of China rolled over maturing medium-term policy loans earlier in the day while keeping interest rates unchanged for the fourth straight month.

Given concerns over U.S. interest rate hikes and yuan depreciation, the authorities will cautiously introduce quantitative measures such as large-scale interest rate cuts or banks’ reserve requirement ratios to stimulate the economy, but structural and targeted measures, such as Hwabao Trust’s Nie, are in the real estate sector. , will be preferred.

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