China’s economic activity contracted sharply in April as a wave of lockdowns across the country posed the most significant challenge to its growth prospects since Covid-19 emerged more than two years ago.
Retail sales, the country’s main gauge of consumer activity, slumped 11.1 per cent year on year, compared with forecasts of a 6.6 per cent fall by economists polled by Bloomberg. Retail sales dropped in March, down 3-5 percent year on year.
Industrial production, which underpinned China’s rapid economic recovery from the initial Covid shock in early 2020 and was expected to rise slightly despite the recent restrictions, dropped 2.9 per cent.
The data are the most striking sign of the rising economic toll from China’s approach to coronavirus, which it has sought to quash through city-wide lockdowns, mass testing and quarantine centres. The elimination of infections is a priority for President Xi Jinping, who has reaffirmed his commitment to the strategy this year ahead of his bid for a third term in power.
The zero-Covid approach had largely contained the virus over the past two years but authorities have escalated their measures dramatically in 2022 following an outbreak of the highly infectious Omicron variant. The restrictions have mainly centred on Shanghai, which was locked down in late March.
“The activity in April was weaker than expected, [and] the declines were led by retail sales, which is understandable in the context of there being lockdowns, ” said Carlos Casanova, a senior economist for Asia at UBP. He expects retail sales to contract even further in May.
Dozens of cities and hundreds of millions of people across China have been placed under full or partial lockdowns as part of a policy that is expected to have deep ramifications for global supply chains.
China’s retail sales suffered a double-digit decline in April.