China's economy shrinks amid strict COVID lockdowns

Beijing, Jul 15: China's economy shrank by 2.6% in the April-June period, according to official data released on Friday.

The period was marked by lockdowns in Shanghai and other cities as China struggled to contain a coronavirus outbreak. This is the weakest quarterly growth registered by the country since the start of the pandemic.

Authorities praise 'stable recovery'

Beijing said that a "stable recovery" was underway after businesses reopened.

"The resurgence of the pandemic was effectively contained,'' China's statistics bureau said in a statement. "The national economy registered a stable recovery."

China's government is promising tax refunds, free rent and other aid to promote economic recovery, but most forecasters expect China to fall short of its 5.5% growth target this year.

A spokesman for the statistics bureau said that consumer inflation is lower than in other countries due to Beijing's "restrained" stimulus policy. Nonetheless, the spokesman said that China's consumption recovery still faces "constraints."

What caused the economic slowdown?

Shanghai, which contains the world's busiest port, was shut down in late March.

Factories and offices were allowed to start reopening in May.

China responded to the 2022 outbreak with a "zero-COVID" policy, attempting to isolate every person who tests positive to the virus. Now, Beijing has switched over to a "dynamic clearing" policy which quarantines individual buildings and neighborhoods.

Economists and business groups say China's trading partners will feel the impact of shipping disruptions over the following months. The slowdown reduces demand for imported oil, food and consumer goods and also hampers China's exports.

Although China recovered quickly from the pandemic in 2020, economic activity weakened as Beijing increased controls on debt in the real estate industry. Growth declined due to a slump in construction and housing sales. One of China's biggest developers, Evergrande Group, has struggled to avoid defaulting on $310 (€309 billion) in liabilities under the new conditions.

Source: DW