First quarter of 2022: China’s economy grows faster than expected

Status: 04/18/2022 09:50

Corona causes less consumption and more unemployment in China: the economy grew by 4.8% in the first quarter. However, it will likely be difficult to meet the government’s target of 5.5% growth for 2022.

Despite the restrictions imposed to deal with the corona pandemic, 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,” he said.

Many areas affected

The production and operation problems of Chinese enterprises have increased. Transport and logistics are also affected. The Chinese government had set itself 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.

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.

Retail sales have collapsed

Corona restrictions are expected 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.

However, industrial production developed a little better than expected 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 only increased by 0.61% compared to the same month last year.

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.

The central bank wants to stimulate the economy

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.

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 was also explained by the weak basis for comparison in 2020, when the pandemic had paralyzed the economy.

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