By Gina Lee

Investing.com – Chinese economic activity in April 2022, as COVID-19 lockdowns took a heavy toll on consumption, industrial production, and employment, adding to fears that the economy could shrink in the second quarter.

Data from the National Bureau of Statistics (NBS), released earlier today, showed that the economy grew by 6.8% over the previous year. The decline was 2.9% and the growth was 4% over the same period.

The April 2022 year-on-year decline was 11.1%, while the 6.1% increase in April 2022 was 6.1%.

Although Premier Li Keqiang said in March that China aims to create more than 11 million jobs, and preferably 13 million urban jobs, in 2022, he recently called the country’s employment situation “complicated and grim” due to the country’s worst COVID-19 outbreaks since 2020.

In dozens of cities, there were either partial or full lockdowns during March and April. One of the longest was in Shanghai. Nie Wen, a Hwabao Trust economist, said that this lockdown and the prolonged testing in Beijing are increasing concerns over economic growth for the remainder of the year.

It’s possible to grow GDP by around 5% this fiscal year even if COVID curbs only affect April and May. The virus is very infectious and so I am concerned about the future growth.

Others aren’t convinced. ING analysts expect a 1% decline in economic growth for the second quarter compared to a year ago. Nomura says that the Chinese economy is at greater risk of falling into recession.

Capital Economics now projects a 2% growth rate for full-year China. However, even that forecast is not certain. “Even once the current virus wave is quashed, COVID-19 controls will continue to hold back activity to some degree over the coming quarters.”

Although policymakers are known to have pledged additional support for the slowing economic recovery, so far, there has only been limited stimulus, with policy rates being cut at a minimal level.

On Sunday, financial authorities announced that banks will allow them to lower the interest rate on home loans. This is based on the same tenor as the Loan Prime Rate for home purchase. The People’s Bank of China rolled over maturing medium-term policy loans while keeping the interest rate unchanged for a fourth consecutive month earlier in the day.

Authorities will be cautious in rolling out quantitative measures such as large-scale cuts to interest rates or banks’ reserve requirement ratios to spur the economy, given concerns about U.S. interest rate hikes and a depreciating Chinese currency, but structural and targeted measures, such as in the property sector, would be preferred, said Hwabo Trust’s Nie.