On Friday, China's government announced that its economy grew 0.4% in the second quarter compared to the same period in 2021, marking the economy's worst quarterly performance since the beginning of the swine flu epidemic.
The main drag on the China's economy was the COVID lockdown in Shanghai, which halted nearly all economic activity in China's wealthiest city for almost two months. In June, China's economy showed some signs of recovery, with industrial output and retail sales up 3.9% and 3.0%, respectively, compared to the same month one year before. Recovery wasn't fast enough to compensate for the COVID shutdowns.
According to a note sent to Fortune, the economy is on the mend, but it is still weak.
China's economy appears to be bottoming out, but it may not be out of the woods yet, according to Bruce Pang. He says that China's economy may have experienced a W-shaped recovery.
It will be hard for China to emerge from its economic downturn.
The foundation for sustainable and steady recovery of the economy is yet to be consolidated, according to the National Bureau of Statistics. The bureau said that the effects of COVID-19 could slow China's recovery in the last half of the year.
China's government seems unwilling to deviate from its COVID-zero stance despite acknowledging Friday that it could continue to shrink demand and disrupt supply this year. The city was put on a city-wide curfew this week.
China's government knew for months that it would be difficult to get back to normal. A plan to save China's economy was laid out by the Chinese premier in a video meeting with 100,000 Chinese officials.
According to the director of the East Asia Institute at the National University of Singapore, June data is showing signs that the renewedStimulus is getting up to Speed. Infrastructure investment increased in June.
If China is to reach Beijing's goal of 5.5% growth this year, it will need to boost its spending even more. Hu says that China's economy needs to grow at a rate of at least 7% in the second half of the year.
Hu says it's impossible to reach 5.5% growth without a significant increase in policyStimulus.
China's economy is expected to grow 4% this year, even though the second quarter data was disappointing, according to a note sent to Fortune. Growth will be boosted in the last half of the year by infrastructure investment.
Throwing more money at infrastructure projects may not increase growth because some of the projects may not work out.
As local governments are being held accountable for wasteful spending, the constraint is whether there will be enough projects that are shovel- ready.
It will be hard to get money into the property sector in China. China's ongoing efforts to rein in the sector and crack down on bloated developers caused property investment and sales to fall in June. Homebuyers in at least 100 construction projects across China refuse to pay their mortgage due to the project's slow progress.
Developers are facing a liquidity crunch because of falling sales. Hu says that they are becoming less willing to spend money. Property is in deep trouble.
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