China GDP: second quarter plunge creates ‘impossible’ task to hit annual growth target without stimulus

China’s economy grew by 0.4 per cent in the second quarter, compared with a year earlier, down from the 4.8 per cent growth seen in the first three months of the year

Zero-Covid policy and a contracting property market coupled with external headwinds threaten Beijing’s ‘around 5.5 per cent’ annual economic growth target

Reading Time:4 minutes

Published: 9:30pm, 15 Jul 2022

China’s economy narrowly escaped a contraction in the second quarter, but still faces a near “impossible” task to meet Beijing’s annual growth target amid concerns over global inflation and recession.

The world’s second largest economy only grew by 0.4 per cent between April and June, falling short of expectations and dropping to the second-lowest pace on record following a contraction of 6.8 per cent in the first quarter of 2020.

China is still seemingly better positioned to mount its recovery, helped by its low inflation rate compared to the United States and Europe, although both the Shanghai and Hong Kong stock markets closed down on Friday due to weak investor sentiment, while the yuan weakened to 6.7670 against the US dollar in onshore trading.

But potential disruptions from its zero-Covid policy and a contracting property market at home, coupled with external headwinds, threaten Beijing’s “around 5.5 per cent” annual gross domestic product (GDP) goal.

It implies that GDP growth has to accelerate to over 7 per cent in the second half to deliver an annual growth of 5 per cent for the whole year this year

Larry Hu

“It implies that GDP growth has to accelerate to over 7 per cent in the second half to deliver an annual growth of 5 per cent for the whole year this year,” said Larry Hu, chief China economist at Macquarie Capital.