Chinese growth resists in first quarter

In the business district in Beijing on April 18, 2022.

Despite the politics Implemented Zero Covid by Beijing, Chinese growth showed amazing momentum in the first quarter. According to numbers released Monday, April 18, growth in the first quarter was 4.8% compared to 2021. That’s more than economists were expecting, who instead forecast growth of 4.3%, according to the Bloomberg panel put. In the last quarter of 2021 it was only 4%.

According to the National Bureau of Statistics, growth in March was driven by industrial activity (+5% over a year) and fixed investment (+9.3%), while retail sales fell (-3.5%). Urban unemployment has risen to 5.8%, but that of 16-24 year olds is much higher at 16%.

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After all, if the first quarter was honorable, the second is less threatening. When the Shanghai National Exhibition Center — the commercial showcase of this city that aspires to be the country’s showcase itself — is turned into an emergency hospital to accommodate more than 40,000 people with Covid-19, all of China is sick. Because the limitation of economic capital since 1is April is just the tip of the iceberg: Of the top 100 Chinese cities, only 13 have failed to implement health restriction measures, according to Gavekal Economics.

In slow motion

Everywhere else, especially in Beijing, everything is being done to keep the population from leaving the city and transport and logistics companies are living a real nightmare. Against this background, also influenced by the war in Ukraine, the economy is obviously slowing down.

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At the beginning of March, the government set a growth target of 5.5% for the year. A modest figure – certainly the lowest China has known in thirty years, excluding 2020 – but more ambitious than most economists are predicting.

While western central banks tend to hike interest rates to fight inflation, China cannot afford to cut interest rates drastically

Faced with the grim economy, Premier Li Keqiang is multiplying meetings and hinting that an economic stimulus plan is being prepared, but as long as President Xi Jinping doesn’t question the policy “Zero Covid”, most measures act like a plaster on a wooden leg. Despite everything, the Central Bank announced on Friday 15th April that the minimum reserve ratio, ie the percentage of deposits that banks have to hold in their coffers, will be reduced by 0.25 points from 25th April. A decline that should encourage banks to lend more and thus support the economy.

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