Recovering from the lockdowns

CHINA - Report 25 Jul 2022 by FAN Gang and Chunyang Wang

GDP grew only 2.5% y/y in H1, but is recovering from the lockdowns. As the pandemic shock has come gradually under control, and with the start of various economic stabilization policies, the recovery of growth in June has lifted Q2 growth to achieve positive growth of 0.4% y/y, contributing to a “back to normal” path.

Industrial output rose 3.4% y/y in H1, down 3.1 pps from Q1. In H1, investment growth was 6.1% y/y, down 3.2 pps from Q1, but still 1.2 pps faster than in 2021. The continuing real estate cooling does not seem set to end anytime soon.

The pandemic lockdowns suppressed consumption. Retail sales of social consumption goods fell -0.7% y/y, down 4 pps from Q1. Survey data shows Chinese consumers are pessimistic about future income growth, putting greater constraint on future consumption recovery. In H1, exports rose 13.2% y/y. In June alone, exports rose 22% y/y, accelerating since April, and are an important force in lifting economic recovery.

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