While Chinese exports rose more than expected in June, imports grew much less than expected. Workers pictured here disinfect a container terminal in Qingdao on July 13, 2022.
Edition of the future | Edition of the future | Getty Images
BEIJING — China posted second-quarter GDP growth of 0.4% from a year ago, missing expectations as the economy struggled to shake off the impact of Covid controls.
Analysts polled by Reuters had expected growth of 1% in the second quarter.
Industrial production in June also beat expectations, rising 3.9% from a year ago, versus a forecast of 4.1%.
However, retail sales in June rose 3.1%, recovering from an earlier slump and beating expectations of no growth from a year earlier. Major e-commerce companies held a promotional shopping festival in the middle of last month.
Retail sales in June were boosted by spending across many categories, including automobiles, cosmetics and drugs. But catering, furniture and building materials fell. Within retail sales, online sales of physical goods rose 8.3% from a year ago in June, slower growth than the previous month’s 14% growth.
Capital investment for the first half of the year exceeded expectations, up 6.1% versus 6% expected.
Overall investment in fixed assets picked up on a monthly basis, rising 0.95% in June from May to an undisclosed figure. While investment in infrastructure and manufacturing maintained a similar or higher rate of growth from May to June, that in real estate deteriorated. Investment in real estate in the first half of the year fell 5.4% from a year ago, worse than the 4% decline recorded in the first five months of the year.
Unemployment in China’s 31 largest cities fell from pre-pandemic highs to 5.8% in June, but that of the 16-24 age group rose further to 19.3%.
The statistics office described the latest economic results as “hard-won achievements”, but warned of the “lingering” impact of Covid and “diminishing demand” in the country. The office also noted the rising “risk of stagflation in the global economy” and the tightening of monetary policy abroad.
At a news conference on Friday, statistics bureau spokesman Fu Linghui said second-quarter economic indicators halted a downward trend. He described the impact of Covid as “short-lived” and pointed out how much lower inflation in China is than in the United States and Europe. Fu added that there are “challenges” in meeting the annual economic targets.
In the second quarter, mainland China faced its worst Covid outbreak since the peak of the pandemic in early 2020. Strict stay-at-home orders hit metropolitan Shanghai for about two months, while restrictions on travel have contributed to supply chain disruptions.
In early June, Shanghai, Beijing and other parts of China were on the verge of resuming normal business activity. In recent weeks, the central government has reduced quarantine times and relaxed some Covid prevention measures.
But different parts of China have had to reinstate Covid controls as new cases rise.
On Monday, Nomura said regions that account for 25.5% of China’s GDP were under some form of lockdown or tighter control. That’s up from 14.9% a week earlier.
Major investment banks have repeatedly cut their full-year Chinese GDP targets due to the impact of Covid controls. Among companies tracked by CNBC, the median forecast was 3.4% at the end of June.
The official GDP target of “around 5.5%” was announced in early March.
“China’s economy is definitely at rock bottom. But it’s still in the middle of its recovery,” said Bruce Pang, chief economist and head of research, Greater China, JLL.
He said he expects policymakers to maintain their easing stance, for a moderate recovery in the second half of the year.