BEIJING -- China’s economic growth edged up to a still-weak 4.8% over a year earlier in the first three months of 2022 as industrial cities shut down to fight coronavirus outbreaks, threatening to disrupt global trade and manufacturing.
Growth in the world's second-largest economy crept up from the previous quarter’s 4% following a slump triggered by tighter controls on use of debt by China’s vast real estate industry, government data showed Monday. Compared with the previous quarter, as other major economies are measured, growth slowed to 1.3% from 1.4%.
“More pain will come" in the current quarter, Iris Pang of ING said in a report. “Further impacts from lockdowns are imminent."
The slowdown hurts China's trading partners by depressing demand for oil, steel, consumer goods, food and other imports. Oil prices, which spiked after Russia’s attack on Ukraine, have fallen back somewhat on expectations Chinese consumption will weaken.
The flow of industrial goods has been disrupted by the suspension of access to Shanghai, a business center with 25 million people, and other industrial cities. Global automakers and other manufacturers have reduced or stopped production.
The disruption "will weigh on activity in April and into May, if not longer," Tommy Wu of Oxford Economics said in a report. That is "likely to have a significant impact on global supply chains.”
First quarter economic growth was below the ruling Communist Party’s annual target of 5.5%. Forecasters have said that will be hard to meet without large government stimulus spending.
Retail spending, factory output and investment in factories, real estate and other fixed assets rose.
“The national economic recovery was sustained and the operation of the economy was generally stable,” said a government statement.
China's latest infection numbers are relatively low, but Beijing is responding to its biggest outbreak since the 2020 start of the pandemic with a “zero-COVID” policy that aims to isolate every person who tests positive.
The ruling party already was promising tax refunds and other aid to businesses to pull the economy out of a slide that began in mid-2021. Last week, Premier Li Keqiang, the No. 2 leader, called for quicker action to get help to struggling entrepreneurs.
Forecasters say Beijing is moving cautiously and using targeted stimulus measures instead of across-the-board spending. Chinese leaders worry that might push up politically sensitive housing costs or corporate debt they worry is dangerously high.
Retail sales rose by a modest 3.3% over a year earlier in the first quarter after demand was dampened by a government appeal to the public to avoid traveling and large gatherings during February’s Lunar New Year holiday, normally a period of big spending on gift-giving, banquets and tourism.
Factory output rose 6.5% and investment in factories, real estate and other fixed assets increased 9.3%, possibly reflecting official orders to banks to lend more readily.
Last week, regulators injected an extra 500 billion yuan ($80 billion) into the pool of money for lending by reducing the amount of deposits commercial banks are required to hold in reserve.
The agency that runs the Shanghai port says operations are normal. But companies say the volume of cargo it handles has fallen.
Other cities affected by suspensions of access include Tianjin, a port and petrochemical center east of Beijing; Shenzhen, a finance and tech center near Hong Kong, and the manufacturing centers of Changchun and Jilin in the northeast. Smaller cities also have suspended access, closed businesses, ordered residents to stay at home or imposed other controls.
Economists have warned spring planting by Chinese farmers who feed 1.4 billion people also might be disrupted. That would hurt economic activity and boost demand for imported wheat and other food, potentially pushing up already high global prices.
China rebounded quickly from the pandemic in 2020, but activity weakened last year as tighter controls on borrowing by real estate developers hit construction, which supports millions of jobs. That made consumers nervous about spending and investors anxious about possible defaults by developers.
Investors are waiting to see what happens to one of China’s biggest developers, Evergrande Group, which has struggled since last year to avoid defaulting on $310 billion owed to banks and bondholders.
Smaller developers have collapsed or defaulted on debts after Beijing reduced the amount of borrowed money they can use.
Chinese officials have tried to reassure investors, saying the impact on lending markets and the economy can be contained. Economists say a potential Evergrande default should have little effect on global financial markets.
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China National Bureau of Statistics (in Chinese): www.stats.gov.cn
