China’s second, third-tier cities lead the way in economic recovery as zero-Covid holds up Beijing, Shanghai
- China’s overall gross domestic product (GDP) beat expectations and grew by 3.9 per cent in the third quarter compared with a year earlier
- Beijing’s GDP grew by 0.8 per cent in the first three quarters this year compared to the same period last year, while Shanghai’s recorded a 1.4 per cent decline
Despite a pickup in China’s overall third quarter gross domestic product (GDP), major cities including Beijing and Shanghai are still recovering at a slower pace, with the stringent zero-Covid policy creating uncertainty for the overall economic recovery, analysts said.
Beijing’s GDP grew by 0.8 per cent in the first three quarters this year compared to the same period last year, while Shanghai’s economy showed a slight rebound and recorded a 1.4 per cent decline compared to a national average growth of 3 per cent.
Shanghai was buffeted by a two-month long lockdown earlier this year, which brought most industrial and service activities to a halt, resulting in its GDP falling by 5.7 per cent in the first half of the year.
The strict implementation of China’s zero-Covid policy in first-tier cities has proven to be a major obstacle to economic recovery, while second-tier and third-tier cities became a main driver, said Peng Peng, executive chairman at the Guangdong Society of Reform.
“If neither the new cases or the Covid control policies improve, it’s possible that the economy could continue to go down,” he said.
“But if pandemic control and economic recovery can be balanced, confidence could be slowly restored.”
In Guangdong province, Guangzhou and Shenzhen recorded growth of 2.3 per cent and 3.3 per cent, respectively, in the first three quarters of the year.
A total of 27 of China’s 31 provincial-level jurisdictions have revealed GDP figures for the first three quarters, with 16 performing better than the national average and central and western regions reporting relatively faster recoveries.
Of the 27, the central Shanxi province recorded the highest growth rate in the first three quarters of the year at 5.3 per cent, with the northern autonomous regions of Inner Mongolia and Ningxia also on the top five, largely propped up by a growth in energy production.
Coal production in Shanxi, a main coal-producing region, grew by 10.5 per cent in the first three quarters, while its unconventional gas production grew by 13.8 per cent.
Coal production in Inner Mongolia and Ningxia also grew by 15.6 per cent and 11 per cent, respectively, in the first nine months of the year.
Southeastern Fujian province saw a 23.2 per cent increase in investment in the manufacturing sector in the first nine months of the year, helping its GDP grow by 5.2 per cent. Its infrastructure investment also grew 14.4 per cent in the same period.
In the eastern Jiangxi province, where its economy grew by 5 per cent, industrial added value grew by 7.4 per cent in the first three quarters, while added value of new electric vehicles and solar panels grew 118 per cent and 113 per cent, respectively.
But despite a pickup in third quarter GDP, high frequency data in October pointed to continued weakening in economic activity, due to further decline in services activity, after virus curbs in many cities were tightened ahead of the 20th party congress.
“Wider headwinds continue to grow. The housing market is still stuck in a downward spiral, global demand is set to cool further, and the weak renminbi is constraining the PBOCs ability to provide policy support,” said a Capital Economics report published last week.