China’s first quarter growth rate was only 4.8%… ‘blockade’ caught on

People walk on a street in Beijing, China on April 18. EPA Yonhap News

China’s economic growth rate in the first quarter of this year was only 4.8%, far below the growth target set for this year. China’s economy, which suffered greatly from the novel coronavirus infection (COVID-19) last year, seems to have been caught up in the recent resurgence of the infection.

China’s National Bureau of Statistics announced on the 18th that the gross domestic product (GDP) grew by 4.8% in the first quarter. Although it is higher than the recent market expectations such as Bloomberg (4.2%), it is far below the ‘around 5.5%’ target set by China last month.

The downward pressure on the economy was mainly from domestic demand. Retail sales in China were -3.5% year-on-year. After peaking at 34.2% in March of last year, it steadily declined to 1.7% in December of last year, and it completely turned negative. It is the first time in one year and nine months since June 2020, during the height of the Wuhan outbreak, that retail sales recorded negative records.

Signs that China’s domestic market is shrinking due to a ‘locked-down’ economy were also detected in various places. By retail sales category, restaurant sales plummeted by 16.4%, and consumption of product categories such as clothing (-12.7%), gold, silver, and jewelry (-17.9%) and automobiles (-7.5%) decreased significantly. In contrast, only food and beverage sales rose 12.5% ​​and 12.6%, respectively. This means that you only buy groceries to eat and drink right away, and don’t buy anything that is not urgent.

The real estate market also slowed significantly. In the first quarter, the sales area of ​​commercial real estate nationwide was 310.46 million square meters, down 13.8%, and the amount was 2.96 trillion yuan, down 22.7%. As for trade, imports fell by 1.7% in March, indicating that the impact of the recent war in Ukraine has become visible. Caixin, an economic media outlet, said, “The epidemic has rebounded in various regions of the country and the change in the situation in Russia and Ukraine has put a burden on China’s economic recovery.”

The problem is that there is a lot of room for the economic contraction in the second quarter to become more pronounced. The economic growth rate in the first quarter did not reflect production disruptions in the industrial sector due to the Shanghai lockdown (March 28 to present). According to Nomura Securities, “regarding 373 million people in 45 cities, including Shanghai, are affected by the full or partial lockdown.” If the lockdown in Shanghai, which is causing production disruptions in major manufacturing industries, is fully reflected, it is predicted that it will be more difficult to achieve the 5.5% growth target this year.

The state-run Xinhua News Agency said, “The internal and external situation is undergoing new changes. There is hope and possibility to achieve the target of around 5.5%, but hard work is required.”

Beijing= Youngbin Cho correspondent [e-mail]

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