China's economy records the slowest growth since the start of 2020


China recorded its weakest growth rate in more than two years after months of harsh Covid lockdowns wreaked havoc across the country.


What’s happened?


Gross domestic product in the world's second-largest economy expanded by just 0.4% in the three months to June 30.

It was the weakest performance since the first quarter of 2020 when China's economy came to a near standstill as it battled to contain the initial coronavirus outbreak that started in Wuhan. In that quarter, GDP contracted 6.8%.


For the first half of this year, the economy expanded 2.5%, way below the 5.5% annual target set by the government. compared with the same period last year, according to the National Bureau of Statistics (NBS) on Friday.


What caused the economic slowdown?


Shanghai, which contains the world's busiest port, was shut down in late March.

Economists and business groups say China's trading partners will feel the impact of shipping disruptions over the following months. The slowdown reduces demand for imported oil, food and consumer goods and also hampers China's exports.


Higher global commodity prices, especially food and energy prices, have added to imported inflation. Growing stagflation risks around the world also threaten China's economic stability, Fu said.


Further Beijing increased controls on debt in the real estate industry. Growth declined due to a slump in construction and housing sales. One of China's biggest developers, Evergrande Group, has struggled to avoid defaulting on $310billion in liabilities under the new conditions.


Government’s approach to solving the crisis 


Authorities began reopening the economy at the start of last month, lifting restrictions in some key cities. The manufacturing and services industries have shown signs of improvement in recent weeks. 

The government has stepped up macroeconomic policy easing with large public spending, tax rebates, policy rate cuts, and a more dovish stance on the property sector. 


Looking forward, we expect to see continued economic recovery in the second half of this year, mainly supported by government-led infrastructure investment, in adding if the government eases Covid restrictions further, consumer confidence could bounce back at a faster pace.


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