China Data Show Economy Shrinking in Challenge to Xi's Target
Comment of the Day

July 07 2022

Commentary by Eoin Treacy

China Data Show Economy Shrinking in Challenge to Xi's Target

This article from Bloomberg may be of interest to subscribers. Here is a section:

A quarterly drop in GDP, which has only happened once before, underlines China’s slower rebound from coronavirus curbs than in 2020, providing less of a boost to a struggling global economy. Debate about the accuracy of official data will likely persist this year as President Xi Jinping urges officials to strive to meet an ambitious target for annual GDP growth of about 5.5%, while at the same time sticking with a Covid Zero policy that requires tough restrictions wherever virus cases emerge.

“There is no plausible story that GDP growth should be positive in the second quarter,” said Logan Wright, head of China markets research at Rhodium Group. “The downturn in household consumption is very significant within both the official retail sales data and other proxies. And the property sector remains a significant drag.”

The evidence from alternative indicators is overwhelming of an ongoing slump in the economy. Travel data shows passenger trips taken on China’s roads were mostly below last year’s levels into July, according to transport figures analyzed by TS Lombard. The number of domestic flights in the quarter was down 62% from the same period last year, according to data provider Variflight.

Eoin Treacy's view

Covid cases in Shanghai doubled today. Earlier this week the newer BA5.2 subvariant was found in Xian and is now also in Beijing. The omicron variant appears to be mutating much more quickly than prior strains but is also resulting in less severe symptoms in most of the world. China has the complication of an unvaccinated population and is only now introducing vaccine mandates.

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