Chinese deflation disturbs world | The Middle East

Chinese deflation disturbs world

Risks overshadow expectations


Saturday – 17 Dhul-Hijjah 1443 AH – 16 July 2022 AD Issue No. [
15936]


China recorded a sharp decline in its economic growth in the second quarter of the year (AP)

Beijing: “Middle East”

China recorded a sharp decline in its economic growth in the second quarter of the year, the worst performance since 2020 over the impact of health constraints and a crisis in the real estate sector, which strongly reflected activity.
Official figures published on Friday revealed that the GDP growth of the second economic power in the world did not exceed 0.4 percent during the April-June period, compared to the same period last year.
This is the weakest growth rate in China since the beginning of 2020, when the Covid-19 epidemic paralyzed Chinese economic activity during the first quarter of the year, registering “negative” 6.8 percent. This decline was expected, but a group of analysts surveyed by Agence France-Presse expected a more moderate slowdown of 1.6 percent.
Although questionable, economists are closely following official figures on China’s GDP given the country’s weight in the world economy. In the first quarter of 2022, China recorded GDP growth of 4.8 percent year-on-year.
The Chinese economy has faced a “very unusual” situation due to the international situation and the outbreak of the Covid-19 epidemic in China, according to Fu Lingui, an official of the National Bureau of Statistics.
As a result, the Asian giant’s growth shrank by 2.6 percent from one quarter to another, after rising 1.3 percent during the first quarter between January and March.
Markets expected a deflation, but its size was a “shock”, Standard & Poor’s Global Market Intelligence economist Rajiv Biswas told AFP.
Since 2020, the country has been pursuing the “zero covid” policy, which aims to limit the registration of new infections in the epidemic to the maximum extent possible, through site-specific isolation procedures, intensive investigation campaigns, quarantine for those found to be infected and track their movements.
In the spring, the economic capital, Shanghai, was closed for two months in response to the worst spate of injuries in China in two years. The idea of ​​laying a similar stone was raised in May in the capital, Beijing, the heart of political power.
These measures dealt a severe blow to the economy, forcing a large number of companies, factories and shops to cease their activities, and putting pressure on supply chains.
And Shanghai is expected to record a 13.7 percent contraction in its gross domestic product in the second quarter of the year compared to the same period last year.
In this context, Julian Evans-Pritchard, an economist at Capital Economics, said it was “hard to believe” to achieve positive growth at this national level during this period.
On the other hand, retail sales, the main indicator of household spending, rose 3.1 percent year-on-year in June, compared with minus 6.7 percent in May, the third consecutive month of decline. Industrial production rose 3.9 percent year-on-year last month, following an unexpected 0.7 percent recovery in May.
The outbreak of the epidemic again contributes to the problems the Chinese economy has suffered, including poor consumption, Beijing tightening its grip on a number of key sectors such as the technology sector, and uncertainty about the future in the face of the war. Ukraine and the crisis in the real estate sector.
New house prices fell again in June, at -0.5 percent at an annual rate, according to the Office for National Statistics. This is the second month of decline for this indicator, which calculates the average prices in seventy Chinese cities.
On the other hand, economist Betty Wang of ANZ Bank pointed out that “an increasing number of buyers are stopping paying their monthly installments due to the economic slowdown and delays” of property developers in construction or in the delivery of homes. According to economist Chui Zhang of Pinpoint Asset Management, this aspect of the property crisis is “disturbing” because it directly threatens the financial system.
In terms of unemployment, the rate reached 5.5 percent in June, compared to 5.9 percent a month ago, but the rate saw a significant increase last month among the 16 to 24 age group, with 19.3 percent.
Beijing has set a target for gross domestic product growth of “about 5.5 percent” this year, a target that many economists doubt can be achieved. Such a figure would reflect China’s weakest growth rate since the early 1990s, with the exception of the COVID-19 outbreak.
The slowdown in growth is a politically sensitive year that is supposed to see, in addition to surprises, the reappointment of Xi Jinping as head of the Chinese Communist Party in the autumn.


Economy

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