With ‘Zero Covid’ behind it, China’s economy has started to recover.

Chinese consumers, wary of big-ticket purchases like cars or apartments, are spending again. Many factories are still operating below capacity, but exports have strengthened. Investment in infrastructure and manufacturing is strong as new housing construction slows.

Although pockets of Chinese economic weakness remain after the government lifted strict “zero Covid” measures in early December, China is recovering faster than expected.

In the year The economy grew by 4.5 percent from January to March in 2022, the country’s National Bureau of Statistics announced on Tuesday. The growth was largely driven by consumers: retail sales, a barometer of spending, jumped 10.6 percent in March despite a decline in auto sales.

China’s share of the rest of the world is high after its worst economic performance last year. For the past two decades, China has been the world’s biggest engine. Although it is under tension with the United States, and disputes with Europe are growing, China is very dependent on both of its economies. The International Monetary Fund warned last week that the world faces a serious recession this year as Western central banks raise interest rates and banks falter.

China’s world’s second-largest economy is recovering, according to a gross domestic product report released on Tuesday.

“The quarter’s growth is starting to show the healthy recovery that was hoped for,” said Louise Lo, a China specialist at the Oxford Economics office in Singapore. The excellent 4.5 percent year-on-year growth rate in this initial opening phase gives the authorities room to provide support to weaker parts of the economy as needed.

China has taken steps to stimulate growth. The government is spending money on high-speed rail lines, highways, bridges and other infrastructure to help grow jobs and consumers. The central bank, the People’s Bank of China, told commercial banks last month that it would allow them to lend more by holding smaller reserves against potential losses.

Growth in the first few months of this year, which began in the first months of this year after the outbreak was brought under control in December, was a big improvement from the previous quarter’s 2.9 percent pace and is close to the 5 percent target. Beijing is set for 2023.

So far, spending has been strongest for services such as travel and food. Last year, large hotels in Beijing and Shanghai turned off elevators and often have diners in 200-seat restaurants now waiting for tables at breakfast. Most of the activity is driven by Chinese shoppers, as domestic flights are slow.

At the same time, China faces a wide gap in its government budget due to rising revenue and expenditure. And the slow-moving housing bust has been a big drag on the economy. In the first quarter, construction of new homes, offices and stores fell 5.8 percent compared to the same period last year.

The local economy in Suzhou, located on the Yangtze River near Shanghai, reflects many national trends. Consumers and companies spend again. But there are huge differences from neighborhood to neighborhood and from business to business.

At a Suzhou street market, Jiang Yongming, a butcher, stands behind a table covered in raw pork and talks about the austerity of his neighborhood’s residents. People who buy meat would ask him to cut a large file into two or three pieces and then buy only one.

Liu Zhongyou, a catfish and clam vendor at Suzhou Street Market, had a very different experience. Last year, it lost sales for a month when nearby restaurants closed due to pandemic restrictions, but now the same restaurants continue to place large orders.

“We were losing money during the pandemic – we had no customers,” Mr Liu said. “It’s good now.”

The difference between two small businesses in the same market is indicative of China’s recovery – strong but uneven.

Retail sales in China rose just 3.5 percent in January and February compared to the same months. So the big increase in March represents the first sign of a strong recovery. But the jump is compared to a sharp drop in March 2022, when Covid cases were on the rise, prompting the start of Shanghai’s two-month lockdown.

And some sectors have never recovered from the epidemic. Movie theaters were particularly hard hit: a third of them went under. Box office revenue fell 55 percent last month from the same month four years ago, according to Beijing-based Maoian Entertainment, an online ticket company that tracks the broader industry.

As China’s economy begins to rebound, there is little sign of inflation. Unlike the West, China has refrained from sending epidemic checks and coupons to families. Therefore, they have limited bargaining power for commodity prices. Consumer prices were 0.7 percent higher in March than a year earlier, and the prices manufacturers charge customers for industrial goods actually fell.

“Insufficient domestic demand is still evident and the foundation for economic recovery is still not strong,” said Fu Lingyi, an official at the Bureau of Statistics.

During the outbreak, the incomes of millions of Chinese were severely depressed and remained fragile. Unemployment among 16- to 24-year-olds rose to 19.6 percent in March from 18.1 percent in February, as many recent college graduates struggled to find white-collar jobs and were wary of working in factories. In a positive sign, unemployment among residents 25 to 59 fell to 4.3 percent in March, from 4.8 percent in February.

A repair shop for tabletop electric motors sits beside Suzhou’s famous canals lined with weeping willows. The shop has been supplying the many small workshops nearby with nails and screws for the city’s massive industrial sector.

The shop owner, who gave his family name Guo, said some workshops had failed during the outbreak, but survivors had returned to work. “It’s basically much better than before, and those that weren’t closed have basically recovered,” Mr Guo said.

Industrial production – factories, mines and power plants – increased by 3.9 percent in March compared to last year, which showed an improvement from 2.4 percent in January and February. But industrial growth in March was still anemic by Chinese standards. A major slowdown in the auto industry was one of the main ones.

Auto sales fell 13.4 percent in the first quarter. In late December, China allowed national subsidies for electric cars to expire and reinstated sales taxes on gasoline-powered cars that had been suspended under the country’s “Zero Covid” measures.

Overall, exports are recovering, including a 14.8 percent jump in March from a year earlier. Factories are getting a backlog of orders during “zero Covid” lockdowns.

Investments in new residential buildings, roads, factories and other fixed assets are the main pillars of the Chinese economy. Total investment in fixed assets is growing, including a 5.1 percent increase in the first quarter compared to the same period last year. But investment is not following the path adopted by Beijing.

The National Bureau of Statistics announced that the government’s spending on new railway lines, roads and other infrastructure increased by 8.8 percent compared to the same months last year. Manufacturing investment increased 7 percent.

But after running out of cash and paying off dozens of overseas bonds in the past two years, residential real estate developers are launching very few new housing projects, even as housing prices begin to stabilize.

They are focused on completing the apartment buildings that have already started, many of them are delayed. Stock market investors are wary of the sector, with one major developer, Sunac China Holdings, seeing its share price plunge 59 percent when trading resumes after a year-long hiatus.

Even people who buy new apartments from developers often do not want to spend money on painting and furniture. A paint store across the street from Mr. Guo’s electrical repair shop has lost customers.

“We have no business now,” said the shop owner, who gave her family name Lu. “No one will come.”

Lee you Research contributed.


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