China’s economy badly hit by Covid lockdowns, negatively affecting businesses, consumers

Economic indicators from China do not look encouraging as the country has been hit hard by widespread coronavirus lockdowns, negatively impacting both businesses and consumers. China, the world’s second-biggest economy Gross domestic product (GDP) fell 2.6 percent quarter-on-quarter in the three months ended June, Geopolitics reported.

Major cities across China, including the major financial and manufacturing hub of Shanghai, have been in full or partial lockdown during this period. Together, these manufacturing and transportation hubs are home to 127 million people. According to a Washington Post report, not a single car was sold in Shanghai in April. Shanghai’s economy reportedly contracted 13.7 percent in the quarter ended June.

The length and severity of the lockdown in Shanghai sent shockwaves through global supply chains and even prompted a rare eruption of public dissent from residents complaining of food shortages and arbitrary quarantine measures, Geopolitics reported. The slowdown was particularly visible in individual consumer spending, despite the authorities’ efforts to build consumption as the engine of economic growth.

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Consumers have cut spending across the board, whether it’s on high-priced items like cars or lower-cost products like cosmetics available online on e-commerce platforms, Geopolitics reported. In a rare move, China’s central bank cut lending rates on August 15 to stimulate demand. Growth has stalled, youth unemployment has hit a record high, the housing market looks shaky and businesses are struggling with supply chain restrictions.

China’s labor market has deteriorated sharply in recent months. The latest data showed that the unemployment rate among 16-24 year olds hit an all-time high of 19.9 percent in July, the fourth straight month of record-breaking. This means that China now has about 21 million unemployed youth in cities and towns. The total is likely to be much higher as rural unemployment is not included in the official figures, Geopolitics reported. There are signs of distress in the Chinese housing market. More and more homebuyers are refusing to pay mortgages on unfinished projects. Chinese property developers cut investment sharply in July, while housing starts suffered the biggest drop in nearly a decade, Geopolitics reported.

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Nationwide, at least 74 cities had been in lockdown since the end of August, affecting more than 313 million residents, according to CNN calculations based on government statistics. Goldman Sachs estimated in September that lockdown-affected cities accounted for 35 percent of China’s gross domestic product (GDP).

It was China’s worst economic performance in two years, adding to concerns about the prospect of a global recession. In early July, Chinese Premier Li Keqiang visited the coastal city of Fuzhou to meet officials from across the southeast industrial belt on how to stabilize the economy. According to the official Xinhua news agency, Li urged officials to get the economy “back on track.”

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Maintaining that legitimacy is more important than ever for Chinese Premier Xi Jinping as he seeks to be selected for an unprecedented third term during the currently ongoing Communist Party Congress. Experts from Wharton and Stanford University believe the challenges facing China’s economy are deeper, structural, longer-term and have been building for years, Geopolitics reported.

These include overinvestment, high savings and modest growth, consumer spending, high debt and low industrial productivity. (ANI)

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)

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