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While Chinese exports rose more than expected in June, imports rose much less than expected. Workers pictured here disinfect a container terminal in Qingdao on July 13, 2022.
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BEIJING — China posted second-quarter GDP growth of 0.4% year-on-year, failing expectations as the economy struggled to shake off the impact of Covid controls.
Analysts consulted by Reuters had forecast growth of 1% for the second quarter.
Industrial production in June also fell short of expectations, rising 3.9% year-on-year, versus the 4.1% forecast.
However, retail sales rose 3.1% in June, recovering from an earlier slump and better than the previous year’s expectations of no growth. Major e-commerce companies held a promotional shopping festival in the middle of last month.
Retail sales in June were boosted by spending in many categories, including autos, cosmetics and pharmaceuticals. But catering, furniture and building materials saw a decline. Within retail sales, online sales of physical goods grew 8.3% year-on-year in June, slower than the previous month’s 14% growth.
Fixed asset investment for the first half of the year was above expectations, up 6.1% from forecasted 6%.
Total fixed asset investment increased on a monthly basis and rose 0.95% in June from May to an undisclosed figure. While investment in infrastructure and manufacturing maintained a similar or better rate of growth from May to June, it deteriorated in real estate. Real estate investment fell by 5.4% in the first half of the year compared to a year ago, worse than the 4% drop in the first five months of the year.
Unemployment in China’s 31 largest cities fell from pre-pandemic highs to 5.8% in June, but that for the 16-24 age bracket rose further to 19.3%.
The statistics agency described the latest economic results as “hard-earned performance”, but warned of the “ongoing” impact of Covid and “shrinking demand” at home. The agency also pointed to the increasing “risk of stagflation in the global economy” and a tightening of monetary policy abroad.
At a news conference Friday, the statistics agency’s spokesman Fu Linghui said economic indicators have halted a downward trend in the second quarter. He described the impact of Covid as “short-lived” and emphasized how inflation in China is well below that of the US and Europe. Fu added that there are “challenges” to meet the full-year economic targets.
In the second quarter, mainland China faced the worst Covid outbreak since the peak of the pandemic in early 2020. Strict stay-at-homes hit the metropolis of Shanghai for about two months, while travel restrictions added to supply chain disruptions.
In early June, Shanghai, Beijing and other parts of China were on their way to resuming normal business activities. In recent weeks, the central government has shortened quarantine times and relaxed some Covid prevention measures.
But several parts of China have had to reinstate Covid controls as new cases mount.
On Monday, Nomura said regions accounting for 25.5% of China’s GDP were under some form of lockdown or heightened control. That is an increase of 14.9% a week earlier.
Major investment banks have repeatedly lowered their full-year GDP targets due to the impact of Covid controls. Of the companies tracked by CNBC, the median forecast was 3.4% at the end of June.
The official GDP target of “about 5.5%” was announced in early March.
“The Chinese economy is undoubtedly bottoming out. But it’s still in the midst of its recovery,” said Bruce Pang, chief economist and chief of research, Greater China, JLL.
He said he expects policymakers to maintain their easing stance ahead of a moderate recovery in the second half of the year.