China’s economy grew just 0.4 percent in the second quarter, a two-year low, official data showed on Friday, with Covid lockdowns and a competitive housing market pushing a government target further out of reach.
GDP in the world’s second-largest economy also fell 2.6 percent in the April-June period compared to the first three months of this year, the National Bureau of Statistics (NBS) said.
The slowdown comes after China’s largest city, Shanghai, went into a two-month lockdown as it battled a resurgence of Covid-19, tangling supply chains and forcing factories to shut down.
Beijing has focused on a zero-Covid policy of stamping out virus clusters as they emerge with quick lockdowns and long quarantines, but this has shaken businesses and made consumers nervous.
“Domestically, the impact of the epidemic continues,” the NBS said in a statement Friday, noting that demand is shrinking and supplies are disrupted.
“The risk of stagflation in the global economy is rising,” the statement added, noting that external uncertainties were mounting.
China has only seen GDP contraction once in the last few decades, and analysts expect the latest figures to push full-year growth down to about 4 percent, beating previous estimates.
Industrial production rose 3.9 percent year on year in June, up from 0.7 percent in May as Covid controls eased.
Retail sales rose 3.1 percent after falling 6.7 percent in May.
The urban unemployment rate was 5.5 percent, up from 5.9 percent in May, the NBS said.
– ‘Still unstable’ –
The data comes amid mounting challenges in China’s main real estate sector – which accounts for a quarter of gross domestic product by some estimates – with weak home sales in recent months.
A growing number of homebuyers are also refusing to pay their mortgages, fearing their homes will not be built on time.
Although there are signs that China’s economy is starting to recover since Shanghai eased lockdown restrictions in June, analysts believe the pressure on consumption is likely to continue.
The news puts pressure on the Communist Party leadership as it prepares for its 20th Congress, when President Xi Jinping is expected to receive another five-year term.
Last Thursday, Premier Li Keqiang said the fundamentals of China’s recovery were “still unstable” and called for more work to stabilize the economy.
Economists have long questioned the accuracy of official Chinese data, suspecting numbers are being massaged for political reasons.
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