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China growth slumps on virus lockdowns, real estate woes: poll
By Beiyi Seow with Lan Lianchao
Beijing (AFP) July 13, 2022

China exports jump on easing virus rules but imports slump
Beijing (AFP) July 13, 2022 - China's exports surged more than expected in June after its largest city eased lockdown rules, official data showed Wednesday, but import growth dipped while lingering Covid controls kept consumers jittery.

Business hub Shanghai reopened in June after being sealed off for two months to stamp out a coronavirus resurgence, helping to improve a backlog of goods.

But China is the only major economy still holding fast to a zero-Covid strategy with snap lockdowns and long quarantines, battering business activity and holding back a consumption recovery.

In June, exports rose more than expected at 17.9 percent on-year, up from 16.9 percent the month before, customs data showed Wednesday.

"We are expecting some of the backlogs to be clearing since companies in Shanghai have been able to operate with lockdown measures lifted in June," Moody's Analytics economist Heron Lim told AFP.

Growth in foreign trade "picked up significantly in May and June" on the back of an improving virus situation, policies to stabilise growth, and work resumption, customs spokesman Li Kuiwen told reporters Wednesday.

But imports rose just one percent, far below the four percent forecast in a Bloomberg survey of analysts.

"Although there are still some unstable and uncertain factors, domestic production and demand is gradually recovering and enterprises have quickly resumed work... in the second half of the year, imports and exports will maintain stable growth," Li said.

Domestic demand was "heavily disrupted" by Covid measures, but there are signs of a rebound in services activity, said Rajiv Biswas, Asia-Pacific chief economist at S&P Global Market Intelligence.

A drop in import volumes points to "weakness in China's construction sector", however, said Capital Economics' senior China economist Julian Evans-Pritchard.

Cooling global demand could also "soon deflate China's pandemic export boom", he added.

In the first six months, China's trade with Russia hit 519 billion yuan ($77 billion), up 27 percent from a year ago, customs figures showed.

China's economic data this week, including gross domestic product and retail sales figures due on Friday, are expected to set the stage for further policy support as an official growth target of 5.5 percent looks increasingly out of reach.

The country's overall trade surplus came in at $97.9 billion, from $78.8 billion in May.

China's economic expansion slumped in the second quarter to levels not seen since early 2020, an AFP poll of analysts found, owing to painful Covid lockdowns and lingering weakness in the real estate sector.

Leaders of the world's second-biggest economy remain firmly wedded to a zero-Covid approach of stamping out clusters as they emerge, but the fallout has sapped growth and is pushing policymakers' annual target of around 5.5 percent out of reach.

The slowdown comes after the country's biggest city Shanghai was sealed off for two months over a virus resurgence -- snarling supply chains and causing factories to shut -- while dozens of others grappled with tightened rules to fight local outbreaks.

Gross domestic product is estimated to have expanded 1.6 percent on-year in April-June, according to the AFP poll of experts from 12 financial institutions.

Several analysts expect the economy to shrink on a quarterly basis -- a first since 2020 at the height of the pandemic.

According to key gauges, activity in both the services and manufacturing sectors contracted in April and May, said Rabobank senior macro strategist Teeuwe Mevissen.

China's property sector, an important economic driver, was also "still in limbo", while lockdowns have severely hit supply and demand, he told AFP.

New home sales for the top 100 developers was 43 percent down on-year in June, according to China Real Estate Information Corporation data, with Nomura analysts adding that metro passenger trips in major cities remained below 2021 levels.

China has only logged a GDP contraction once in recent decades, and analysts expect the latest reading will drag full-year growth to around four percent, slashing earlier estimates.

Economists have long questioned the accuracy of official Chinese data, suspecting that figures are massaged for political reasons.

And Friday's official release will be closely watched as the Communist Party gears up for its 20th Congress when Xi Jinping is expected to be given another five-year term as president.

- Zero-Covid vs growth -

China's policymakers want both zero-Covid and growth, an aim made clear during April's Politburo meeting, said Macquarie economist Larry Hu in a recent report.

Authorities have vowed efforts to meet this year's target, a goal reiterated by Xi last month, and leaders will likely "decide whether to double down or back down" in July, Hu said.

"Rhetorically, policymakers are unlikely to drop the name of 'zero-Covid' any time soon. That said, they could still redefine 'zero-Covid' to make it less and less disruptive to the economy," he added.

Last Thursday, Premier Li Keqiang said the foundations for China's recovery are "still unstable" and called for more work to stabilise the economy.

And "multiple uncertainties" also surround the latest rebound, said ANZ Research in a report.

Besides unexpected Covid outbreaks which could trigger more restrictions on movement, "a slowdown in the US economy and the Fed's hiking moves may cloud the outlook for China's exports," ANZ added.

Domestically, consumer inflation climbed in June to the highest in two years as pork prices spiked, official data showed Saturday, threatening relative stability from a global surge in food prices.

China's economy has started to recover after lockdown restrictions were lifted in Shanghai from June 1, said Oxford Economics' lead economist Tommy Wu.

But even if future outbreaks are less disruptive as authorities fine-tune their strategies, "pressure on consumption will likely persist", he added.

This week, an auto industry association downgraded its 2022 sales forecast on weaker demand.

"Consumer sentiment is unlikely to turn sanguine as strict mobility restrictions will be imposed even when the number of Covid cases in a small neighbourhood is very low," Wu added.

China exports jump on easing virus rules but imports slump
Beijing (AFP) July 13, 2022 - China's exports surged more than expected in June after its largest city eased lockdown rules, official data showed Wednesday, but import growth dipped while lingering Covid controls kept consumers jittery.

Business hub Shanghai reopened in June after being sealed off for two months to stamp out a coronavirus resurgence, helping to improve a backlog of goods.

But China is the only major economy still holding fast to a zero-Covid strategy with snap lockdowns and long quarantines, battering business activity and holding back a consumption recovery.

In June, exports rose more than expected at 17.9 percent on-year, up from 16.9 percent the month before, customs data showed Wednesday.

"We are expecting some of the backlogs to be clearing since companies in Shanghai have been able to operate with lockdown measures lifted in June," Moody's Analytics economist Heron Lim told AFP.

Growth in foreign trade "picked up significantly in May and June" on the back of an improving virus situation, policies to stabilise growth, and work resumption, customs spokesman Li Kuiwen told reporters Wednesday.

But imports rose just one percent, far below the four percent forecast in a Bloomberg survey of analysts.

"Although there are still some unstable and uncertain factors, domestic production and demand is gradually recovering and enterprises have quickly resumed work... in the second half of the year, imports and exports will maintain stable growth," Li said.

Domestic demand was "heavily disrupted" by Covid measures, but there are signs of a rebound in services activity, said Rajiv Biswas, Asia-Pacific chief economist at S&P Global Market Intelligence.

A drop in import volumes points to "weakness in China's construction sector", however, said Capital Economics' senior China economist Julian Evans-Pritchard.

Cooling global demand could also "soon deflate China's pandemic export boom", he added.

In the first six months, China's trade with Russia hit 519 billion yuan ($77 billion), up 27 percent from a year ago, customs figures showed.

China's economic data this week, including gross domestic product and retail sales figures due on Friday, are expected to set the stage for further policy support as an official growth target of 5.5 percent looks increasingly out of reach.

The country's overall trade surplus came in at $97.9 billion, from $78.8 billion in May.


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