First quarter of 2022: China’s economy is growing faster than expected

Corona is causing less consumption and more unemployment in China: the economy grew by 4.8 percent in the first quarter. However, it will be difficult to achieve the government’s target of 5.5 percent growth for 2022.

Despite the restrictions imposed to deal with the corona pandemic, China still achieved unexpectedly strong growth of 4.8 percent in the first quarter. However, according to the Beijing Statistics Office, the economic momentum in the second largest economy has been weakening since March.

“The downward economic pressure has increased,” spokesman Fu Linghui told the press in Beijing. Domestic consumption has decreased. “Since March, the situation in the world has developed in a complicated way. The impact of the epidemic in the country continues,” he said.

Many areas affected

The problems in the production and operation of Chinese companies have increased. Transport and logistics are also affected. China’s government had set a growth target of 5.5 percent for the whole year. However, the full extent of the corona outbreak and the curfews as well as the effects of the Ukraine war could not be sufficiently taken into account.

The growth in the first quarter is above the forecasts of experts, who had counted on just over four percent. The increase was also stronger than in the weak fourth quarter of the previous year, when only 4.0 percent was achieved.

Retail sales collapsed

It is expected that the corona restrictions will continue to weaken the economy in the second quarter. An indication of this is the surprisingly strong decline in retail sales in March by 3.5 percent compared to the same month last year.

However, industrial production developed somewhat better than expected with an increase of 5.0 percent. Fixed investment also increased more than forecast in the first quarter, at 9.3 percent overall. In March, however, they were noticeably weaker and only increased by 0.61 percent compared to the same month last year.

China is currently experiencing the largest corona wave since the pandemic began more than two years ago. Since the most populous country is pursuing a strict zero-Covid policy, there are extensive curfews in Shanghai and other metropolitan areas. Tens of millions of people cannot leave their homes. Many companies have to shut down operations. Freight traffic is also restricted.

Central bank wants to stimulate economy

The disruptions are likely to continue for weeks. In order to stimulate the economy, the central bank announced on Friday that it would slightly reduce banks’ minimum reserves. This should provide the economy with around 530 billion yuan (76 billion euros) in liquidity in the long term.

China’s economy had achieved strong growth of 8.1 percent last year, even if momentum had slowed significantly in the fourth quarter. However, the strong growth in 2021 was also explained by the low basis for comparison in 2020, when the pandemic had paralyzed the economy.