China’s economic activity plummets as Covid lockdown hits growth

Economic activity in China contracted sharply in April since Covid-19 emerged more than two years ago, as a nationwide wave of lockdowns posed the most significant challenge to its growth prospects.

Retail sales, the main measure of consumer activity the country has entered contraction in MarchThat was an 11.1% drop from a year earlier, compared with a 6.6% drop forecast by economists polled by Bloomberg.

Industrial production, which underpinned China’s rapid recovery from the COVID-19 shock in early 2020, fell 2.9% and is expected to edge up despite recent restrictions.

The figures are the clearest sign yet of the rising economic toll from China’s approach to the coronavirus, which it has sought to stamp out with city-wide lockdowns, mass testing and quarantine centers.Eliminating infection is a President Xi Jinping’s top priorities Before he ran for a third term this year.

The zero-coronavirus strategy has largely contained the virus over the past two years, but authorities have significantly upgraded its implementation in 2022 following the outbreak of a highly contagious variant of Omicron that was locked down in late March, which focuses on in Shanghai.

Dozens of Chinese cities and hundreds of millions of people have been placed under full or partial lockdown as part of a policy expected to have far-reaching consequences for China. Global Supply Chain.

China’s economy has suffered from liquidity crisis Its highly leveraged property developers and a broader real estate slowdown as home sales plummet.

Over the weekend, the government effectively cut the benchmark mortgage rate on new loans for first-time homebuyers to 4.4% from 4.6% for the latest time. A series of easing measures Designed to support one of the country’s most important economic drivers.

“The government is under increasing pressure to roll out new stimulus measures to stabilize the economy,” said Zhang Zhiwei, chief economist at Pinpoint Asset Management, adding that the rate cut was “a step in this direction.”

But “the effectiveness of these policies depends on how the government will ‘fine-tune’ the zero-tolerance policy for the Omicron crisis,” he said.

Asian markets reversed early gains and traded lower on Monday after the data. China’s CSI 300 opened up 0.7% after the data but fell 0.8%, while Hong Kong’s Hang Seng gained 1.1% before falling 0.4%.

Last week, authorities said citizens can’t leave Nearly seven weeks after the city imposed a city-wide lockdown, Shanghai has taken tougher measures for “non-essential” reasons. Authorities aim to fully reopen Shanghai from June 1, a city official said on Monday.

China’s GDP up 4.8% Year-on-year in the first quarter. The government is targeting growth of 5.5 percent this year, the lowest official target in 30 years. Economists have lowered their growth forecasts for the second quarter.

Analysts at Australian bank ANZ maintained their 5% growth target for 2022, citing that stimulus would “offset the loss of economic activity over the past two months”. But they are “pessimistic about China’s medium-term prospects” as supportive measures are expected to be lifted next year.

“The impact of Shanghai’s lockdown is far-reaching,” they wrote. “Economic and technological ties to the rest of the world are at risk”.

The surveyed unemployment rate was 6.1% in April, the highest level since February 2020.

Additional reporting by Jennifer Creery in Hong Kong

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