Xi Jinping’s economy slumps as zero Covid strategy slows growth


Xi Jinping’s key economic target is in tatters after the Chinese premier’s zero Covid strategy triggered a severe slowdown in growth.

China’s economy grew just 0.4% in the second quarter, the weakest performance since the start of the pandemic and the lockdown of Wuhan two years earlier, and the second weakest in three decades.

The weak expansion means China is unlikely to meet its 5.5% GDP growth target, a blow for Mr Xi as he prepares to secure a third term in office.

Its National Bureau of Statistics said “the basis for a sustained economic recovery is not stable”, warning of the risks posed by continued outbreaks.

Beijing is expected to release hundreds of billions of dollars in stimulus in a bid to support growth, although detailed plans have yet to be drawn up.

Goldman Sachs cut its forecast for China’s annual growth to 3.3% following the data, saying the figures suggested a “heavier than expected toll” from the shutdowns in April and May.

The bank said China’s recovery from recent shutdowns would be slower than the 2020 rebound, due to signs of slowing demand elsewhere in the world.

The Shanghai manufacturing hub was the hardest hit after entering a two-month lockdown. Output fell 13.7% as lockdowns led to factory closures and caused disruption at the world’s biggest port.

In Beijing, which also introduced restrictions, output fell 2.9%, the third highest of any province.

Economists at Australia and New Zealand Bank said “new downside risks” to growth now loom for China’s economy, including a faster-than-expected drop in mortgage payments from homebuyers and the prospect of further local closures.

Julian Pritchard of Capital Economics said the reading was “even weaker than it looks”, calling it “unbelievable” that output was higher between April and June despite a late-period rebound.

He said: ‘Even with some manipulation of the figures, it is difficult to see how the government’s target of ‘around 5.5%’ growth this year can be achieved.

Chinese property prices fell 0.1pc in June, the tenth consecutive month of decline despite government efforts to stem a housing crisis.

Sales fell for the twelfth consecutive month, the steepest fall since China created a market for private property in the 1990s.

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