Small Fry

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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).

Originally posted as part of the Finimize daily email.

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