China’s economy expanded at a weaker pace in the second quarter hit hard by the strict zero-COVID policy, casting doubt over Beijing’s ability to achieve its growth target of around 5.5 percent.
Gross domestic product grew only 0.4 percent on a yearly basis in the second quarter, following the first quarter’s 4.8 percent expansion, data from the National Bureau of Statistics revealed Friday. GDP was expected to climb 1.0 percent.
Slow GDP growth in the second quarter shows that fiscal stimulus helped to avoid an economic contraction, ING economist Iris Pang said.
“Unless we see a lot of infrastructure being put into construction activities, we believe that it will still be challenging for the economy to reach 5.5 percent growth,” said Pang.
The official GDP figures are likely to eke out growth of 3-4 percent this year but the reality on the ground will be closer to zero growth across the year as a whole, economists at Capital Economics said.
On a quarterly basis, GDP decreased 2.6 percent in the second quarter, bigger than the expected 1.5 percent fall.
In the first half of 2022, the economy expanded 2.5 percent from the previous year, which was well below the government’s full year target of around 5.5 percent.
However, the June data showed improvement in economic activity as restrictions were eased.
Industrial production growth improved to 3.9 percent from 0.7 percent. But this was slower than economists’ forecast of 4.1 percent.
Retail sales advanced 3.1 percent annually, reversing the 6.7 percent fall in May. Sales were forecast to remain flat in June.
During the January to June period, fixed asset investment logged an annual growth of 6.1 percent versus economists’ forecast of 6.0 percent.
The surveyed jobless rate fell to 5.5 percent in June from 5.9 percent in May.
Elsewhere, the People’s Bank of China has retained the one-year medium-term lending facility rate at 2.85 percent and the seven-day reverse repurchase agreement rate at 2.1 percent.
The central bank injected liquidity of CNY 100 billion via one-year MLF and CNY 3 billion through seven-day reverse repo operations on Friday.
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