The Chinese economy contracted sharply in the second quarter, highlighting the colossal toll on activity from widespread COVID-19 lockdowns and pointing to persistent pressure over the coming months from a darkening global growth outlook.
Yesterday’s data come at a time of fears of a global recession as policymakers jack up interest rates to curb soaring inflation, heaping more hardship on consumers and businesses worldwide as they grapple with challenges from the Ukraine war and supply chain disruptions.
GDP fell 2.6 percent in the second quarter from the previous quarter, official data showed, compared with expectations of a 1.5 percent decline and a revised 1.4 percent gain in the previous quarter.
Photo: AP
On a year-on-year basis, GDP in the April-June quarter grew a tepid 0.4 percent, missing a forecast gain of 1 percent, according to a Reuters poll of analysts, a sharp slowdown from 4.8 percent in the first quarter.
For the first half of the year, GDP grew 2.5 percent, well below the government’s target of about 5.5 percent growth for this year.
“China’s economy has stood on the edge of falling into stagflation, although the worst is over as of the May-June period. You can rule out the possibility of a recession, or two straight quarters of contraction,” said Toru Nishihama, chief economist at Dai-ichi Life Research Institute in Tokyo.
“Given the tame growth, China’s government is likely to deploy economic stimulus measures from now on to rev up its flagging growth, but hurdles are high for PBOC [People’s Bank of China] to cut interest rates further as it would fan inflation, which has been kept relatively low at present,” Nishihama said.
Full or partial lockdowns were imposed in major centers across the nation in March and April, including the commercial capital, Shanghai, which saw a year-on-year contraction of 13.7 percent in GDP last quarter.
While many of those curbs have since been lifted, and last month’s data offered signs of improvement, analysts do not expect a rapid economic recovery. China is sticking to its tough “zero COVID” policy amid fresh flare-ups, the local property market is in a deep slump and the global outlook is darkening.
The imposition of new lockdowns in some cities and the arrival of the highly contagious BA.5 Omicron subvariant of SARS-CoV-2 have heightened concerns among businesses and consumers about a prolonged period of uncertainty.
Analysts believe room for the central bank to ease policy further could be limited by worries about capital outflows, as the US and other economies aggressively raise interest rates to fight soaring inflation.
China’s rising consumer prices, while not as hot as elsewhere, might add to constraints on monetary policy easing.
A Reuters poll forecast China’s growth to slow to 4 percent this year, far below the official growth target of about 5.5 percent.
Data on last month’s activity, also released yesterday, showed that China’s industrial output grew 3.9 percent from a year earlier, quickening from a 0.7 percent rise in May, although below a 4.1 percent increase forecast in a Reuters poll.
Retail sales, on the other hand, rose 3.1 percent from a year ago last month and marked the quickest growth in four months, after authorities lifted a two-month lockdown in Shanghai. Analysts had expected it to be flat after May’s 6.7 percent drop.
“Retail growth indicates that lockdowns have been the primary drag on consumption, with demand clearly rebounding once Shanghai and other major cities emerged from lockdowns at the end of May,” said Jacob Cooke, CEO of WPIC Marketing + Technologies, in Beijing.
“Consumers are still harboring some uncertainty about lockdowns, but with indications that future lockdowns won’t be as strict, we’re optimistic that consumption will continue to recover in H2,” he said.
DOLLAR CHALLENGE: BRICS countries’ growing share of global GDP threatens the US dollar’s dominance, which some member states seek to displace for world trade US president-elect Donald Trump on Saturday threatened 100 percent tariffs against a bloc of nine nations if they act to undermine the US dollar. His threat was directed at countries in the so-called BRICS alliance, which consists of Brazil, Russia, India, China, South Africa, Egypt, Ethiopia, Iran and the United Arab Emirates. Turkey, Azerbaijan and Malaysia have applied to become members and several other countries have expressed interest in joining. While the US dollar is by far the most-used currency in global business and has survived past challenges to its preeminence, members of the alliance and other developing nations say they are fed
TECH COMPETITION: The US restricted sales of two dozen types of manufacturing equipment and three software tools, and blacklisted 140 more Chinese entities US President Joe Biden’s administration unveiled new restrictions on China’s access to vital components for chips and artificial intelligence (AI), escalating a campaign to contain Beijing’s technological ambitions. The US Department of Commerce slapped additional curbs on the sale of high-bandwidth memory (HBM) and chipmaking gear, including that produced by US firms at foreign facilities. It also blacklisted 140 more Chinese entities that it accused of acting on Beijing’s behalf, although it did not name them in an initial statement. Full details on the new sanctions and Entity List additions were to be published later yesterday, a US official said. The US “will
COLLABORATION: The operations center shows the close partnership between Taiwan and Japan in the field of semiconductors, Minister of Economic Affairs J.W. Kuo said Tokyo Electron Ltd, Asia’s biggest semiconductor equipment supplier, yesterday launched a NT$2 billion (US$61.5 million) operations center in Tainan as it aims to expand capacity and meet growing demand. Its new Taiwan Operations Center is expected to help customers release their products faster, boost production efficiency and shorten equipment repair time in a cost-effective way, the company said. The center is about a five-minute drive from the factories of its major customers such as Taiwan Semiconductor Manufacturing Co’s (TSMC, 台積電) advanced 3-nanometer and 2-nanometer fabs. The operations center would have about 1,000 employees when it is fully utilized, the company
Intel Corp chief executive officer Pat Gelsinger has retired from the company and stepped down from its board of directors just as the company is in the middle of trying to execute a turnaround plan. Intel chief financial officer David Zinsner and Intel Products CEO Michelle Johnston Holthaus are serving as interim co-CEOs while the board searches for Gelsinger’s replacement, the company said in a statement. Frank Yeary, independent chair of the board of Intel, is to serve as interim executive chair, the company said. Gelsinger’s departure is hitting at a tumultuous time for the US chipmaker. Once the industry leader in
RSS