China’s economic growth accelerates but weak amid shutdowns

AP

14:19 JST, October 24, 2022

BEIJING (AP) — China’s economic growth accelerated in the latest quarter but still was among the weakest in decades as the ruling Communist Party tries to reverse a downturn while enforcing anti-virus controls and a crackdown on debt in its vast real estate industry.

The world’s second-largest economy grew by 3.9% over a year earlier in the three months ending in September, up from the previous quarter’s 0.4%, official data showed Monday.

The planned release of data last week was postponed while the ruling Communist Party met to award President Xi Jinping a new term as leader. Investors and the Chinese public watched the meeting for initiatives to stimulate the economy or reduce the impact of the “Zero COVID” strategy that has shut down cities and disrupted business, but none were announced.

The improvement is “mainly a result of more flexible” anti-virus controls that isolate individual buildings or neighborhoods instead of cities, said Iris Pang of ING in a report. But she said more lockdowns are “still a big uncertainty.”

“This uncertainty means the effectiveness of pro-growth policy would be undermined,” Pang said.

No data were immediately released for growth compared with the previous quarter, the way other major economies are measured. In the quarter ending in June, the economy shrank by 2.6% from the previous three-month period.

Growth slid in the second half of 2021 after controls on debt that regulators worry is dangerously high caused a slowdown in real estate, one of China’s biggest economic engines. Growth slumped to 4% over a year earlier in the final quarter.

Beijing has eased mortgage lending and local governments have taken over some unfinished projects to make sure buyers get apartments. But regulators are sticking to limits on debt that have forced developers into bankruptcy and caused some bigger competitors to miss payments to bondholders.

The ruling party’s “Zero COVID” strategy has temporarily shut down Shanghai and other industrial centers despite rising costs and public frustration. That has boiled over into protests in some areas at a time when other countries are easing anti-virus controls.

For the first nine months of 2022, growth was 3% over a year earlier, barely half the ruling party’s official 5.5% target. Leaders have stopped talking about that goal but promised easier lending and other measures to boost growth.

The International Monetary Fund and private sector forecasters have cut their outlooks for annual growth to as low as 3%. That would be the second-weakest since the 1980s after 2020, when growth plunged to 2.4% following the shutdown of much of the economy for two months to contain the coronavirus outbreak.

The slump hurts China’s trading partners by depressing demand for imported oil, food and consumer goods.

Repeated shutdowns and uncertainty about business conditions have devastated entrepreneurs who generate wealth and jobs. Small retailers and restaurants have closed. Others say they are struggling to stay afloat.

Beijing is using cautious, targeted stimulus instead of across-the-board spending, a strategy that will take longer to show results, economists say. Chinese leaders worry too much spending might push up politically sensitive housing costs or corporate debt.

Growth for the first half of the year was 2.5% over a year earlier, one of the weakest levels in the past three decades.