As the effects of Omicron on the economy further intensified, weighing down on April industrial production, retail sales and investment, an official with the National Bureau of Statistics (NBS) said there are signs of improvement in May and growth in the second quarter is expected to remain stable. GDP growth is expected to be around 4% in the second quarter, but as recovery is expected to further gain pace in June and the third quarter, the economy still has the chance of achieving an annual growth target of around 5.5%. Industrial production contracted by 2.9% year-on-year in April, down from a growth of 5% in March and retail sales shrank by more than 11%, according to the NBS. Both figures were lower than market expectations, reflecting the epidemic's weight on the economy.
Fixed-asset investment saw a year-on-year increase of 6.8% in the first four months, down 2.5 percentage points compared with the first quarter. However, despite the epidemic dealt a blow to the economy in April, the effects are “short-term and external,” and the Chinese economy's fundamentals remain positive and the trend of high-quality development remains unchanged, according to Fu Linghui, Spokesperson for the NBS. Fu said the domestic Covid situation has eased since mid-April and the economy is expected to see improved performance, noting that Shanghai and Jilin province were already in the process of resuming work and production and putting economic activity back on track. Cao Heping, Economist from Peking University, told the Global Times the downward pressure China faced in April is the most serious challenge since the first quarter of 2020, when the Covid-19 outbreak first hit Wuhan. Analysts said the epidemic in Shanghai could have taken away half of the city's GDP in April, and factoring in the ripple effects across the surrounding Yangtze River Delta, the drag on the national economy could reach 0.2 percentage points in April. With static management lasting through April, the current round of the epidemic could have undercut the country's annual GDP growth by 0.4 percentage points, Cao said.
As Shanghai is resuming work and production, up to 60% of the negative impact could be reversed if things go well, reducing the drag on the national GDP to around 0.2 percentage points, Cao said. Growth in the energy and basic industries was unable to offset a marked slowdown in manufacturing, which was hit hard in April featuring a sharp decrease in the auto sector, among others, according to the NBS. Industrial production in the Yangtze River Delta was down 14.1% in April due to the Omicron surge in Shanghai, home to the country's largest automaker SAIC Motor and the figure for the Northeastern part of the country dropped by 16.9% because of the outbreak in Jilin province, a car manufacturing hub. On the bright side, the added industrial value of high-tech manufacturing grew 4% in April while investment in the high-tech sector grew by 22% in the first four months, the Global Times reports.
China's retail sales continued contracting in April due to the greater-than-expected impact of new Covid-19 flare-ups in several major urban hubs. Retail sales fell 11.1% year-on-year to CNY2.95 trillion in April. From January to April, retail sales dropped 0.2% year-on-year to CNY13.81 trillion. Online sales increased 3.3% during the period. Online sales of physical goods reached CNY3.29 trillion, accounting for 23.8% of total retail sales. Overall, the impact on domestic economic activity is likely to be short-term, with the fundamentals for steady and long-term growth unchanged, and the trend of high-quality development intact, Fu Linghui, Spokesperson from the NBS, said.
