What's going on?
Data out on Friday showed that China’s economy posted its second-worst quarterly growth in 30 years.
What does this mean?
We’ve had our whole team of analysts working on this head-scratcher all day, and they’ve come to a startling conclusion: it turns out that shuttering businesses and keeping your population locked in their homes isn’t productive for a country’s economy. No, really: China’s services sector – which accounts for over half its economy – shrank 0.4% from the same time last year, while its retail sales dropped 4.6%. It’s just a blessing that some Chinese factory workers basically lived on site, since manufacturing output managed to grow 0.7%. But hostage-taking only goes so far, and the country’s economy ultimately only grew by 0.4% last quarter – well below the 4.8% of the quarter before.
Why should I care?
Zooming in: Be ambitious, but be realistic.
We now know that China’s economy grew 2.5% in the first half of the year, making its government’s full-year target of 5.5% – already a 30-year low – look well out of reach. Its economy would now need to grow by around 8% for it to happen, even as the country stands by a zero-Covid policy that’s currently putting a quarter of its population under some form of restriction. That simply isn’t going to happen, says Goldman Sachs: the investment bank now thinks the country’s economy will grow just 3.3% this year.
The bigger picture: A true underdog story.
China is a huge buyer of everything from oil to corn, so this slowdown doesn’t bode well for a global economy already hit by recession concerns. But China isn’t going down without a fight: economists are expecting its government to introduce hundreds of billions of dollars worth of stimulus to boost growth for the rest of the year (tweet this).