By Laura He, CNN Business
China’s economy got off to a strong start in 2022, posting a growth rate that exceeded expectations. But as the country grapples with a significant Covid surge and dozens of cities go into lockdown, the coming months may bring more challenges.
China’s gross domestic product grew by 4.8% in the three months to March 31 compared to the same period as last year, according to data released Monday by the country’s National Bureau of Statistics. That was faster than the 4% year-over-year increase the world’s second largest economy registered in the previous quarter, also beating the 4.4% growth rate forecast by a Reuters poll of economists.
Growth was buoyed by better-than-expected economic performance in January and February, with several economic indicators beating analysts’ forecasts for the two months.
But Beijing’s efforts to contain the worst Covid outbreak in two years has dealt a blow to economic activity since March, including in the country’s financial center and manufacturing hub — Shanghai. Many companies have been forced to shut down some operations, including automakers Volkswagen and Tesla and iPhone assembler Pegatron.
Nomura analysts estimate that full or partial lockdowns are now affecting nearly a quarter of China’s population and 40% of the economy.
Chinese Premier Li Keqiang has repeatedly warned over the past week of the threat that the surge in Covid cases poses to growth and jobs. Last Wednesday he promised further interest rate cuts to stimulate the economy. Two days later, the People’s Bank of China announced a cut in the reserve ratio – which dictates the amount of cash banks must hold in their reserves – a move intended to boost lending.
The World Bank and some investment banks recently revised downwards their forecasts for China’s GDP growth in 2022, citing increasing risks from Beijing’s compliance with its strict Covid restrictions.
China’s economy grew 8.1% in 2021, beating the government’s own targets. In the final months of the year, however, the pace of expansion slowed down significantly. The government has set its growth target for 2022 at around 5.5%, the lowest in three decades.
The CNN Wire
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