But now, caught off guard by its pledge to contain the spread of Covid-19 with widespread lockdowns and mass quarantines, China has suffered one of its worst quarters in years, threatening a global economy heavily dependent on Chinese factories and consumers. For the country’s ruling Communist Party, the recession could put additional pressure on Beijing at a sensitive time. China is scheduled to hold its party congress later this year. A booming economy and growing wealth were part of the deal Chinese citizens accepted in exchange for living under authoritarian rule. But lockdowns, a key element of Beijing’s zero-Covid policy, have increased the risk of instability – both socially and economically. China’s National Bureau of Statistics said on Friday that the economy grew 0.4 percent from a year earlier in the second quarter, worse than some economists had expected. It was the slowest growth rate since the first three months of 2020, when the country effectively shut down to fight the early stages of the pandemic and its economy contracted for the first time in 28 years. The 2020 recession was short-lived, with the Chinese economy recovering almost immediately. But the current outlook is not so promising. Unemployment is nearing record highs. The housing market is still a mess, and small businesses are bearing the brunt of the weakness in consumer spending. “China is the shoe that never dropped in the global economy,” said Kenneth Rogoff, a Harvard University economics professor and former chief economist of the International Monetary Fund. “China cannot be the global driver of growth right now, and long-term fundamentals point to much slower growth over the next decade.” It is an unwelcome complication in a year when China is trying to project unwavering strength and stability. At the party congress, Xi Jinping, the country’s leader, is expected to run for another five-year term, further consolidating his power. In May, Li Keqiang, China’s premier, called an emergency meeting and sounded the alarm about the need to boost economic development to more than 100,000 officials from businesses and local governments. The stark warning cast doubt on China’s ability to meet its previous growth target of 5.5 percent for the year.
The latest on China: Key things to know
Card 1 of 6 China’s economy is faltering. Battered by lockdowns imposed to limit the spread of Covid, China’s economic engine has shuddered in recent months as home sales fell, shops and restaurants closed and youth unemployment rose. The slowdown has fueled doubts about the sustainability of the country’s strict strategy to eliminate nearly all Covid-19 infections. Financial scandal. Depositors from across the country descended on the city of Zhengzhou for a rare mass demonstration after money they deposited in rural banks using third-party online platforms was frozen as investigators looked into allegations of widespread fraud. The authorities responded with violence. Forced labor. Mining companies in China’s western Xinjiang region are taking a bigger role in the supply chain behind the batteries that power electric vehicles and store renewable energy. But their links to forced labor practices could spell trouble for industries that depend on materials from China. China’s slowing growth is complicating an already fragile global economy. Rising inflation has raised the risk of a recession in the United States, while Russia’s invasion of Ukraine has pushed up energy prices and disrupted supply chains across Europe. In previous moments of economic crisis, China eased financial pressures by accessing cheap manufacturing and a largely untapped consumer market willing to spend. But China is no longer growing by leaps and bounds. The Covid restrictions have combined with policies implemented in recent years – such as cracking down on property speculation and curbing the power of China’s tech giants – to exacerbate the slowdown. So far this year, Starbucks, Nike and Hilton have warned that weak spending in China had dented sales. While much of the world has learned to live with the coronavirus, China has adopted a zero-Covid policy to do whatever is necessary to prevent infection. Under this policy, residents of an entire apartment building could be confined to their homes for weeks if a single tenant became infected. A few positive cases could cause an entire section of a city to be locked down. Even as the toll from these policies has become apparent, Mr. Xi has not flinched. He has said he is willing to endure some temporary financial pain in order to keep Chinese citizens free from Covid. The most recent economic turmoil hit in April and May, when Shanghai, China’s largest city, went into lockdown for nearly two months and the impact rippled through the economy. Office buildings were closed and workers were ordered to stay at home. Across China, hundreds of millions of consumers shut down – leaving shops, restaurants and service providers to continue without customers. Zheng Jingrong, owner of a shop in Beijing that sells imported handmade clothes, said she had typically sold 150 to 200 pieces of clothing in a month before the pandemic. In May, she sold 20. Her regulars don’t come anymore, she said, and people are generally reluctant to go out. Each year of the pandemic has been “worse than the year before,” Ms Zheng said. And the problem isn’t limited to her clothing store. Ms. Zheng said more than 300 shops operated in the same neighborhood as her store in Gulou, a maze of streets and alleyways once filled with food stalls, cafes and bars. He estimated that 20 percent of those businesses were closing or had closed. “Because China began to flourish and develop from the 1980s, its economy has always been on the rise,” said Ms Zheng, who has run the shop for 15 years. “Now it’s obviously going down.” Retail sales, a measure of how much consumers are spending, fell 4.6 percent from last year in April to June, according to the government. And even as the economy improved in June, the threat of further mass lockdowns could derail a budding recovery. Japanese securities firm Nomura estimated that, as of Monday, 247 million people in 31 cities were under some form of lockdown in China, covering about a fifth of the national population and accounting for about $4.3 trillion in annual gross domestic product. The number of cities affected almost tripled from a week earlier. Beijing has urged local authorities to step up measures to ensure labor stability during the lockdown. And yet, with so many small and medium-sized businesses suffering financially, the government has struggled to manage rising unemployment. As of June, unemployment was 5.5 percent — an improvement from April and May, but close to the highest level since China began reporting the data in 2018. For job seekers ages 16 to 24 , which include new college graduates, the unemployment rate was more than three times higher at 19.3%. James Fu quit his job last month as a landscape designer for a property developer – a grueling job he’s grown to hate. But now he faces the stress of finding work in a tough job market, especially in the real estate market. Mr. Fu, 28, said there were fewer jobs at real estate companies because companies were either struggling financially or using the recession to justify cutting staff and costs. And because the job pool has shrunk, he said, the demands to secure one have increased. “I’ve been stuck recently,” said Mr. Fu, who lives in Chengdu, Sichuan province. “This year can be particularly difficult. I think it’s been more difficult since the pandemic started.” Along with high unemployment, there are other signs of economic discontent. On Sunday, there was a rare demonstration in the central Chinese city of Zhengzhou by depositors demanding their money back from four rural banks after their funds were frozen. The protests turned violent when the authorities sent in guards to break up the demonstration. Weakness in the real estate market also led to public displays of defiance. A growing number of property owners who bought homes before they were built have told banks and regulators they will default on their mortgages, upset by construction delays and falling home prices, according to Chinese media. When China implemented measures in 2020 to curb property speculation, it pushed many property developers into a debt spiral, reducing new home prices for the first time in years and shaking consumer confidence, many of whom had plowed through economies. of households in real estate. . In response to concerns about mortgage repayments, China’s banking and insurance regulator said it would work across the central government and with local authorities to ensure buildings are finished, jobs are saved and “ensuring stability” in the real estate industry, according to the state. – run TV. Claire Fu contributed to the research.
