July 1, 2022

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China's economy slows sharply in April due to Reuters restrictions

China’s economy slows sharply in April due to Reuters restrictions

© Reuters. Customers wait outside a restaurant in Beijing, China, April 15, 2022. REUTERS/Tingshu Wang

BEIJING (Reuters) – China’s economic activity slowed sharply in April as extended COVID-19 lockdowns took huge losses in consumption, industrial production and employment, raising fears that the economy could collapse.

Full or partial lockdowns were imposed in dozens of cities in March and April, including an extended shutdown in the Shanghai mall, keeping workers and consumers at home and severely disrupting supply chains.

Data from the Office for National Statistics (ONE) on Monday showed that retail sales in April contracted 11.1% from a year earlier, marking the biggest contraction since March 2020, worse than planned.

In some counties, dining room services were suspended, causing a 22.7% drop in restaurant income in April. Auto sales in China fell 47.6% from a year earlier as automakers cut production amid empty showrooms and a shortage of parts.

As anti-virus measures hampered supply chains and brought distribution to a standstill, industrial production was down 2.9% from a year earlier, below expectations for 0.4% growth. The reading was the biggest drop since February 2020.

In line with the decline in industrial production, China processed 11% less in April than a year earlier, with daily output dropping to the lowest level since March. The country’s electricity generation in April also fell 4.3 percent from the previous year, the lowest level since May 2020.

Ni Wen, a Shanghai-based economist at the Hwabao Trust, said Shanghai’s prolonged lockdown and Beijing’s prolonged testing are adding to concerns about economic growth for the rest of the year.

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“GDP growth of around 5% this year is still possible if the COVID brakes are only going to affect the economy in April and May. But the virus is so contagious that I remain concerned about future growth.”

(Reporting by Kevin Yao, Stella Keogh and Elaine Zhang; Editing by Bernard Orr and Jacqueline Wong; translation by Flora Gomez)