Exceeded expectations: China’s economy grows by almost 5%

exceeded expectations
China’s economy grows nearly 5%

Despite the pandemic and the conflict in Ukraine, the Chinese economy grew by 4.8% in the first quarter of 2022. However, the confinements, some of which were very harsh, led to a significant decline, especially in retail trade. Industrial production, on the other hand, is booming.

Despite the restrictions imposed in the fight against the latest corona wave, China still achieved an unexpected growth of 4.8% in the first quarter. However, according to the Beijing Bureau of Statistics, economic momentum in the second-largest economy has weakened since March. “The downward economic pressure has increased,” spokesman Fu Linghui told reporters in Beijing. Domestic consumption has fallen.

“Since March, the situation in the world has evolved in a complicated way. The impact of the epidemic in the country continues,” the spokesperson said. “Some factors were above expectations.” The production and operation problems of Chinese enterprises have increased. Transport and logistics are also affected. The Chinese government had set a growth target of 5.5% for the year as a whole. However, the extent of the corona outbreak and the curfews as well as the effects of the war in Ukraine could not be sufficiently taken into account. Experts have expressed doubts about the possibility of achieving this ambitious goal. The first quarter growth is higher than the forecasts of the experts, who expected a little more than four percent. The increase was also stronger than in the weak fourth quarter of the previous year, when only 4.0% was achieved.

Experts expect corona restrictions to continue to weaken the economy in the second quarter. An indication of this is the surprisingly sharp decline in retail sales in March of 3.5% compared to the same month last year. Industrial production developed a little better, but ahead of schedule, with an increase of 5.0%. Fixed investment also rose more than expected in the first quarter, at 9.3% overall. In March, however, they were noticeably weaker and rose only 0.61% compared to the same month last year.

Many companies go bankrupt

China is currently experiencing the biggest corona wave since the pandemic began more than two years ago. As the most populous country pursues a strict zero-Covid policy, there are extensive curfews in Shanghai and other metropolitan areas. Tens of millions of people cannot leave their homes. Many businesses have to go out of business. Freight traffic is also limited. Oxford Economics experts were surprised at the strong growth throughout the quarter. “We believe this primarily reflects growth that official data shows for January and February, before economic activity weakened in March,” according to an analysis.

In March, the Chinese economy and especially household consumption slowed down due to lockdowns and mobility restrictions. The disruptions are expected to last for weeks. In order to stimulate the economy, the central bank announced on Friday that it would slightly reduce bank reserve requirements. This should provide the economy with around 530 billion yuan (76 billion euros) of long-term liquidity. However, the central bank did not go further and raise rates as some pundits had expected.

China’s economy recorded strong growth of 8.1% last year, although momentum slowed considerably in the fourth quarter. However, the strong growth in 2021 is also explained by the weak comparison base in 2020, when the pandemic had slowed down the economy in China considerably.

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