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Covid resurgence slams China–slowdown looms amid tepid first quarter growth of 4.8%

China's covid resurgence poses a serious threat

China, despite registering an economic growth of 4.8 per cent in the January to March period of this year, will have to steer through serious challenges amid the Russia-Ukraine conflict and resurgence of Covid 19 infection in Shanghai. Though the growth rate is higher than the 4 per cent registered in the October to December period of 2021, weakening consumer spends and increase in unemployment have started to worry the authorities.

The household debt levels have also increased, which means citizens will be wary of spending.

The commercial capital of the country and home to about 25 million people has been under stringent lockdown since the beginning of the month. Analysts told India Narrative that the impact of the lockdown will be felt in the next quarter.

China’s zero Covid approach has come under scrutiny as several companies were forced to remain shut while a large number of small and medium enterprises has been forced to wind up. “This has led to salary reductions and uncertainty among the people, which now has started to impact overall spendings though Beijing has assured that all necessary steps will be taken to support growth and employment,” an analyst said.

Arvind Yelery, senior research fellow at the Peking University and visiting faculty at Fudan University in Shanghai told India Narrative that liquidity infusion into the system will be critical. “A host of measures will be rolled out to encourage spends and thereby support growth,” Yelery said, adding that the authorities are aware of the problems.

The country’s central bank– People’s Bank of China (PBOC) is set to come out with a host of monetary policy measures including reduction in key policy rates. Besides, Liquidity infusion into the system will be critical.

After the first quarter GDP numbers, China’s foreign ministry, however, said that the country’s economic growth continued to “sustain the momentum of recovery and development.” “Major macro indicators remained within an appropriate range,” Wang Wenbin, spokesperson of the ministry said at the press conference.

According to CNN, Larry Hu, chief economist for Greater China at Macquarie Group wrote that "economic data in April are set to worsen further." The full year’s growth rate could be around 5 per cent though the target set is 5.5 per cent.

The International Monetary Fund has revised down the country’s growth rate further from the earlier projection of 4.8 per cent to 4.4 per cent for 2022.  

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China posts 4.8% GDP growth in Jan-March quarter but challenges remain