Rebounds growth in China, despite the jolts of the Covid

18 avril 2022

Beijing (awp/afp) - China on Monday announced a rebound in its first quarter growth of 4.8% year on year, despite "significant challenges" for the economy at a time when the containment of Shanghai heavily penalizes the activity.

Although questionable, China's official Gross Domestic Product (GDP) figure is still under close scrutiny given the country's weight in the global economy. This increase was widely anticipated. A group of analysts polled by AFP expected a rebound, however, more moderate (4.3%). In the fourth quarter of 2021, the country's GDP had grown by 4% year on year.

The Chinese economy is facing "significant challenges", acknowledged a senior economic official at a press conference. From one quarter to another, the growth of the Asian giant is up by only 1.3%, a rate lower than that of the October-December period (1.6%).

China, which had largely brought Covid-19 under control for two years, has been facing its worst epidemic outbreak since last month. Several tens of millions of Chinese were confined in March in the technological metropolis of Shenzhen (south), and are still confined in the northeast of the country, the cradle of the automotive industry, as well as in Shanghai, the economic capital of the country.

Contrary to many countries that opt ​​for coexistence with the virus and lift restrictions, China continues to follow a zero Covid policy.

Consumption in the red

These measures, which seriously harm transport and supply chains, have led to the shutdown of many businesses.

These difficulties came on top of those that had already weighed on the Chinese economy in recent months: sluggish consumption, regulatory tightening in several sectors such as real estate and technology, and uncertainties linked to Ukraine.

In March, retail sales, the main indicator of household spending, fell 3.5% year on year, their biggest drop since April 2020, when the Asian giant was just starting to emerge from the first wave of the crisis. 'epidemic. The confinements in March "hit hard" consumer spending, in particular in shops and restaurants, underlines for AFP the analyst Rajiv Biswas, of the firm IHS Markit (S&P Global).

The consequences of the confinement in Shanghai in April will be "significant" on consumption, warns Mr Biswas, arguing that its inhabitants have the highest disposable income in China. For its part, industrial production only increased by 5% over one year last month, against 7.5% over the first two months of the year.

The unemployment rate rose to 5.8% in March from 5.5% in January and February. Particularly monitored by the authorities and calculated for urban dwellers only, the unemployment rate had reached an absolute record of 6.2% in February 2020, at the height of the epidemic, before receding.

As for fixed capital investment, its growth slowed down over the first three months of the year to 9.3% against 12.2% at the end of December, according to the SNB.

"Headwinds"

The impact of confinements on the economy is “probably underestimated” by the figures published on Monday, observes analyst Julian Evans-Pritchard, from the firm Capital Economics, who says he is “surprised” by the resilience of growth.

In any event, the April figures will be bad due to logistical disruptions, which will weigh on GDP in the second quarter, he said. Beijing has set itself the target of growth "around 5.5%" this year, which would be for China the weakest rate since the beginning of the 1990s, except for the year 2020 marked by the first wave of the Covid.

Given the context, this objective now seems "unattainable", said in a note the economist Larry Hu, of the Australian asset manager Macquarie. "China is facing multiple headwinds, including Covid-related lockdowns and (a slowdown in) the real estate sector," Hu noted.

The setbacks of promoter Evergrande, on the verge of bankruptcy, seized up the entire sector. Real estate and construction, which weigh more than a quarter of the country's GDP, had played a key role in 2020 in the post-pandemic recovery.

The current situation contrasts sharply with that of last year: China then saw its growth jump by 18.3% in the first quarter, due to a catch-up effect with 2020, when the Covid-19 had paralyzed the economy.