The Chinese economy has grown at a slower pace this spring since the onset of the coronavirus pandemic, a sharp slowdown in a Covid-19 policy that continues to cause widespread blockades and massive quarantines, which has halted some activity. business.
The National Statistics Office said Friday that the economy expanded 0.4 percent over the previous year in the second quarter, the lowest growth rate since the first three months of 2020. then when the country effectively closed down to fight the early stages of the pandemic, its economy shrank for the first time in 28 years.
The fall of 2020 was short-lived, and the Chinese economy recovered almost immediately. But the current picture is not so promising. Unemployment is approaching record highs. The housing market remains a disaster and small businesses bear the brunt of the weakness of consumer spending.
The slowdown in the economy poses a political problem for China, which is trying to project unwavering strength and stability in a year in which it is scheduled to hold its Communist Party congress. Xi Jinping, the country’s leader, is expected to serve another five-year term.
A prosperous economy and the promise of growing wealth have sustained the rise of China, part of the business that Chinese citizens accept in exchange for living under authoritarian rule. But blockades, a staple of Beijing’s zero-Covid policy, have increased the risk of social and economic instability.
“China is the shoe that has never fallen on the world economy,” said Kenneth Rogoff, a professor of economics at Harvard University and a former chief economist at the International Monetary Fund. “China is not in a position to be the global engine of growth right now, and the long-term fundamentals point to much slower growth in the next decade.”
In May, Li Keqiang, China’s prime minister, convened an emergency meeting and sounded the alarm about the need to boost economic growth to more than 100,000 local business and government officials. The harsh warning called into question China’s ability to meet its previous 5.5 percent growth target for the year.
Measures to curb over-indebtedness of real estate developers have been combined with Covid restrictions to aggravate a slowdown that could have global implications. Last month, Nike said revenue and profits fell in its last fiscal quarter, and sales in China fell 19 percent.
The most recent economic turmoil occurred in April and May, when Shanghai, China’s largest city, went into confinement for nearly two months and the impact affected 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 store in Beijing that sells imported handmade clothing, said he had normally sold 150 to 200 pieces of clothing a month before the pandemic. In May, he sold 20. His regular customers no longer go there, he said, and people are generally reluctant to go out. Each year of the pandemic has been “worse than the previous year,” Ms. Zheng said.
And the problem isn’t limited to your clothing store. Ms. Zheng said there were more than 300 shops operating in the same neighborhood as her shop in Gulou, a maze of streets and alleys that was once full of food stalls, cafes and bars. He estimated that 20 percent of these companies were closing or had closed.
“As China began to grow and develop from the 1980s onwards, its economy had always been growing,” Ms. Zheng, who runs the store for 15 years. “Now it’s obviously going down.”
Retail sales, an indicator of how much consumers spend, fell 4.6 percent from the previous year, from April to June, according to the government.
And while the economy improved in June, the threat of massive new quarantines may derail this nascent recovery. This week, the cities of Xi’an, Lanzhou and Haikou imposed partial blockades, placing restrictions on several million residents by closing non-essential businesses and enforcing massive tests.
Japanese securities firm Nomura estimated that as of Monday, 247 million people in 31 cities were under some form of blockade in China, which covered about a fifth of the national population and accounted for the equivalent of about $ 4.3 trillion in gross domestic product annually. . The number of affected cities almost tripled from a week earlier.
Beijing has urged local authorities to intensify measures to ensure job stability during confinements. However, with so many small and medium-sized businesses suffering financially, the government has struggled to control rising unemployment.
In June, unemployment stood at 5.5 percent, an improvement over April and May, but close to the highest level since China began reporting figures in 2018. For applicants of 16 to 24 year olds, which include new college graduates, the unemployment rate was higher. than triple 19.3 percent.
James Fu quit his job last month as a landscape designer for a real estate developer, a grueling job he began to hate. But now he faces the anxiety of finding work in a difficult labor market, especially in the real estate sector.
Mr. Fu, 28, said there were fewer jobs available in real estate companies because companies were struggling financially or using the recession to justify staff cuts and costs. And as the set of jobs has shrunk, he said, the requirements to secure one have increased. He said a job he could have gotten in the past with two or three years of experience now required five to ten years, with the same salary.
“I’ve been stopped recently,” Mr. Fu, who lives in Chengdu, Sichuan Province. “This year can be especially difficult. I think it’s been harder since the pandemic started.”
Along with high unemployment, there are emerging indications that the weakness of the real estate market could also pose a major problem for the Chinese government this year. Measures to limit real estate speculation pushed the sector into a debt spiral, depressing new home prices for the first time in years and shaking consumer confidence, many of whom had invested household savings in the real estate sector.
Dissatisfaction among people who bought homes before they were built is growing. According to state media, more home buyers are refusing to pay mortgages, upset by delays in construction, as well as by falling house prices.
Buyers of 35 projects in 22 cities have decided to stop paying mortgages, Citigroup analyst Griffin Chan wrote in a note to clients on Wednesday. This has put real estate companies in an obstacle: if they abandon customers ’down payments for not paying their mortgages, there could be“ social instability, ”Chan said.
Claire Fu contributed to the research.