As countries around the world stumble in the face of pandemics, China has largely stood on its own, seemingly unable to deal with economic problems that are slowing growth.
But now, dragged down by its commitment to curbing the spread of Covid-19 and widespread lockdowns and mass housing, China has suffered the worst in years, threatening a global economy dependent on Chinese industries and consumers.
For the country’s ruling Communist Party, the decline could make Beijing even more difficult. China plans to hold its party congress later this year. Economic prosperity and a growing economy were part of the trade-off that Chinese citizens accepted in exchange for life under a dictatorship.
But the lockdowns, which are a key part of Beijing’s zero-Covid policy, have increased the risk of instability – both economically and financially.
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 economists had expected. It was the lowest rate since the first three months of 2020, when the country was effectively locked down to fight the epidemic, and its economy shrank for the first time in 28 years.
The downturn of 2020 was temporary, the Chinese economy started to recover. But the current situation is unreliable. Unemployment is near the highest levels on record. The housing market is still in turmoil, and small businesses are facing weak consumer spending.
“China is the shoe that hasn’t dropped on the global economy,” said Kenneth Rogoff, a Harvard University economics professor and former chief economist at the International Monetary Fund. “China is unlikely to be the engine of global growth right now, and long-term trends point to slower growth in the next decade.”
This is an unnecessary problem in a year when China is trying to create an unshakeable power and stability. At the party conference, Xi Jinping, the country’s leader, is expected to continue for another five years, increasing his power in power.
In May, Li Keqiang, the Premier of China, called an emergency meeting and announced the need to stimulate economic growth to more than 100,000 officials from businesses and local governments. The dire warning casts doubt on China’s ability to reach its initial growth rate of 5.5 percent a year.
The latest in China: Things you need to know
China’s economy is stumbling. Frustrated by the lockdowns that prevent the spread of Covid, China’s economic engine has faltered in recent months, with housing sales slowing, shops and restaurants closed and youth unemployment high. The slow decline has raised doubts about the ability of this country’s sustainable strategy to eradicate almost all Covid-19 infections.
China’s slow growth is weakening the global economy. Rising inflation has increased the risk of a recession in the United States, while Russia’s invasion of Ukraine has raised energy prices and disrupted trade flows across Europe. In the previous years of the financial crisis, China mitigated the financial crisis with the opportunity to create cheap products and an untapped market of consumers who wanted to spend.
But China is no longer growing by leaps and bounds. The Covid restrictions have combined with policies introduced in recent years – such as cracking down on housing speculation and reducing the power of China’s tech giants – to exacerbate the deficit. So far this year, Starbucks, Nike and Hilton have all warned that spending in China has slowed sales.
While most of the world has learned to live with the coronavirus, China has adopted a zero-Covid policy to do everything necessary to prevent disease. Under the law, residents of the entire building can stay in their homes for weeks if one tenant is infected. A few good cases can cause an entire part of the city to shut down.
Despite the growing number of these policies, Xi has not weakened. He also said that he is willing to endure economic hardship for a while so that Chinese citizens do not have Covid.
The most recent economic crisis was in April and May, when Shanghai, China’s largest city, was shut down for nearly two months and the economic crisis worsened. Office buildings were closed, and workers were ordered to stay at home. Across China, hundreds of millions of shoppers were shut down – leaving stores, restaurants and service providers to continue without customers.
Zheng Jingrong, the owner of a shop in Beijing that sells handmade clothes, said he usually sells 150 to 200 clothes a month before the outbreak. In May, he sold 20. His regular customers don’t come back, he said, and people often don’t want to go out. Each year of the epidemic has been “worse than the last year,” Zheng said.
And the problem is not only with his clothing store. Ms. Zheng said that more than 300 shops operate near her shop in Gulou, many streets and alleys filled with food stalls, restaurants and bars. He said 20 percent of those businesses were closing or going out of business.
“Because China began to develop and develop from the 1980s, its economy has been rising,” said Zheng, who has run the store for 15 years. “Now it’s going down.”
Retail sales, which reflect consumer demand, fell 4.6 percent from last year in April to June, according to the government. And even if the economy improves in June, the threat of more people living in crowded places could derail the recovery.
Japanese security firm Nomura says that, as of Monday, 247 million people in 31 cities were under lockdown in China, which accounts for a fifth of the world’s population and accounts for $4.3 trillion in annual sales. . The number of affected cities was almost three times higher than the previous week.
Beijing has urged government officials to take measures to ensure normal operations during the lockdown. And yet, with small and medium-sized businesses struggling financially, the government struggled to cope with rising unemployment.
By June, unemployment stood at 5.5 percent – an improvement from April and May, but close to the highest level since China began reporting statistics for 2018. More than three times higher than 19.3 percent.
James Fu quit his job last month as a landscape designer for a real estate developer – a boring job he hated. But now they are struggling to find work in a tight labor market, especially in real estate.
Mr Fu, 28, said fewer jobs were found in property companies because companies were struggling with money or using the economic downturn as an excuse to cut staff and costs. And because the number of jobs has decreased, he said, the need for a person to find a job has increased.
Mr. Fu, who lives in Chengdu, Sichuan Province, said: “I recently stopped. “This year could be very difficult. I think it has been very difficult since the outbreak. “
Along with high unemployment, there are other signs of economic discontent. On Sunday, there were frequent protests in the central Chinese city of Zhengzhou by depositors to return their money to four rural banks after their payments were suspended. The protests escalated when the authorities sent security guards to quell the protests.
Weakness in the domestic market has also led to public protests. A growing number of homeowners who bought homes before construction have declared mortgage defaults to banks and regulators, frustrated by construction delays and falling property prices, according to Chinese media.
After China introduced measures in 2020 to reduce property valuations, it pushed more homebuilders into debt, pushed down new home prices for the first time in years and undermined consumer confidence, many of whom plowed home equity into real estate. .
Responding to concerns about defaults, China’s banking and insurance regulator said it would work with the central government and local governments to ensure housing is completed, jobs are saved and “ensuring stability” in the real estate industry, according to the government. – turn on the TV.
Claire Fu contributed to the research.