China’s retail sales fell to their lowest level in two years, while industry output fell, according to official data released Monday, illustrating the disastrous economic consequences of Beijing’s zero-covid policy.
As dozens of Chinese localities, including vital economic hub Shanghai, deal with limitations, the world’s second-largest economy has maintained draconian virus safeguards, restricting global supply lines.
Officials have pledged to promote growth by cutting mortgage rates for first-time homebuyers. While Shanghai’s gradual reopening was announced over the weekend, critics worry that the zero-covid plan may dampen any good effects.
The most recent cut came on Monday, when the National Bureau of Statistics (NBS) revealed that retail sales in April were down 11.1 percent year over year.
It’s the worst drop since March 2020, as Chinese consumers stayed at home or were wary of remaining restrictions.
“The epidemic had a considerable influence on economic activities in April,” NBS spokeswoman Fu Linghui told reporters Monday.
He emphasised that the blow would be “temporary,” and that a gradual recovery was expected.
Industrial output fell 2.9 percent year over year, owing to the impact of closed plants and transportation issues as officials tightened covid restrictions last month.
This is the lowest growth rate since early 2020, and it is down from March’s 5.0 percent.
China is currently dealing with its worst covid outbreak since the outbreak began.
“The protracted Shanghai shutdown and its ramifications throughout China, as well as logistics delays stemming from highway regulations… have seriously harmed domestic supply chains,” said Tommy Wu, Oxford Economics’ head China economist.
He went on to say that home consumption has been “struck even harder,” and that the interruption might last until June, with a recovery taking weeks.
The number of people unemployed is increasing.
According to the report, the urban jobless rate hit 6.1 percent in April, the highest level since early 2020.
Given that a record number of fresh graduates are likely to enter the labour market this year, China unveiled steps on Friday to assist young people in finding jobs.
Smaller businesses that recruit more graduates can receive social insurance subsidies.
According to the official Xinhua news agency, state-owned firms would also increase hiring.
In a recent note, financial services firm Gavekal warned that “repeated indications from the authorities that real policy easing is on the horizon have not played out,” adding that policymakers may be waiting for lockdowns to lift before increasing stimulus.
“However, as Shanghai and Beijing struggle to reopen and the economic damage grows, officials may be pushed to provide stimulus sooner,” Gavekal predicted.