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The economic slowdown in China has become conspicuous. The country’s real gross domestic product (GDP) rose 0.4% in the April-June quarter this year from the same period last year, a significant drop from 4.8% in the January-March quarter.
It is the lowest rate of growth since the 2020 January-March quarter, when the situation around the novel coronavirus pandemic worsened and real GDP growth was down 6.9%. The figure also indicates negative growth, decreasing by about 10% on an annualized basis from the previous quarter.
This is primarily because economic activities stalled in many parts of China due to factors such as Shanghai’s lockdown, which lasted for about two months until the end of May.
The administration of Chinese President Xi Jinping is continuing with its zero-COVID policy, which aims to contain the spread of infections by comprehensively restricting residents’ activities. It can be said that the latest figures have confirmed the profound cost of the policy.
The Chinese government should be fully aware that its zero-COVID policy is also hurting overseas economies.
China has been dubbed “the world’s factory” and has achieved economic growth as a major hub for international supply chains. Shanghai in particular is important for Japan, because the city has many parts industries, including for automobiles.
Toyota Motor Corp. and other automakers were forced to suspend some of their production lines in Japan due to a disruption in parts supplies from China.
Among electric appliance makers, Sharp Corp.’s Shanghai plant, which manufactures air conditioners and washing machines for the Japanese market, stopped operations in April and May. There have also been a number of cases in which other major manufacturers stopped shipments of rice cookers and microwaves.
The impact is not limited to Japanese companies, and has extended to many companies in Europe and the United States, too. If having operation bases in China becomes riskier, it is more likely that business operators will shift their factories to other countries at a faster pace. Such movement would also have a negative effect on China’s economy.
Beijing is adhering rigidly to the zero-COVID policy apparently because it is keen to claim that its regime is superior by touting a successful containment of the virus, in comparison with Western nations that have suffered from infections. China also seems motivated to use it as propaganda in the quinquennial National Congress of the Communist Party later this year.
However, it has been reported that a case of the BA.5 omicron subvariant, which is believed to be highly contagious, has been confirmed in China. Completely containing variants is unrealistic.
It has been pointed out that if this situation continues China will be unlikely to achieve its growth rate target of around 5.5% per year for 2022. If it fails to meet the target, it would be for the first time since 1998.
China has created jobs and led political stability through high economic growth. The public is increasingly dissatisfied with the current strict regulations on movement and the sluggish economy. Sticking to the zero-COVID policy despite these points is hard to understand.
