China’s economic activity fell sharply in April as the country continued to enforce lockdowns as
part of its zero tolerance COVID-19 policy.
Industrial output in China dropped 2.9% in April from a year ago, while retail sales contracted
11.1% in the month, weaker than a projected 6.6% decline. The unemployment rate climbed to
6.1% and the youth jobless rate hit a record.
China’s economy has taken an enormous hit from the government’s stringent efforts to keep
COVID-19 under control, with major cities such as Shanghai locked down for several weeks and
restrictions in many other places shutting factories and blocking supply chains.
The government has doubled down on its zero tolerance strategy, even though the high
transmissibility of the Omicron variant of COVID-19 puts cities at greater risk of repeatedly
locking down and reopening.
The zero-tolerance approach has prompted criticism from businesses, fueled public frustration,
and has put Beijing’s ambitious full-year economic growth target of 5.5% out of reach.
Monday’s data suggests gross domestic product declined 0.68% in April from a year ago, the
first contraction since February 2020, according to economic forecasts. Citigroup (C)
economists have now downgraded their full-year growth forecast for China this year to 4.2%
from 5.1% previously.
China’s benchmark CSI 300 stock index closed 0.8% lower with healthcare and consumer
staples shares being the worst performers. The onshore yuan weakened 0.1% to 6.7957 per
dollar, while the yield on 10-year government bonds was little changed at 2.82%.
