China’s economy is grinding to a halt

Economic growth in China is grinding to a halt. The days of soaring double-digit growth are over, and the malaise facing the country’s spluttering economy goes far deeper than the hit from Covid-19 lockdowns.

Gross domestic product in the April to June quarter grew by a paltry 0.4 per cent from a year earlier, according to figures released on Friday, well below the forecasts of analysts. On a quarter by quarter basis, the economy shrank, down 2.6 per cent compared with January to March. It was sobering reading for China’s communist leaders, who derive much of their legitimacy from their management of a fast-growing economy.

It is easy to blame the impact of the lockdowns. Restrictions were imposed on major cities across the country in March and April. Shanghai locked its residents in their homes for most of that time, and China’s commercial capital saw a year-on-year contraction of 13.7 per cent in the second quarter.