China’s economy started the year surprisingly well, but it may not end well

Retail sales rose 6.7% in the first two months of 2022 compared to last year, according to data released by the National Bureau of Statistics on Tuesday. That was well above the estimated 3 percent growth, according to a Reuters poll of economists.

Industrial production jumped 7.5% over the same period, also beating the 3.9% forecast.

“The national economy continued to recover steadily, demand for products grew rapidly, and employment and prices generally remained stable,” the bureau said in a statement.

While experts say government policies such as cutting interest rates and increasing infrastructure spending have spurred the Chinese economy, they warn there are plenty of problems on the horizon.

“Macro data for January and February is quite strong, indicating that supportive government policies have begun to help the economy,” Zhiwei Zhang, chief economist at Pinpoint Asset Management, wrote on Tuesday. “But the macroeconomic outlook for the next few months remains challenging,” he said, pointing to recent Covid outbreaks as the main risk.

The release of the data comes at a time when China is facing its worst Covid surge since the initial outbreak in Wuhan in early 2020.

On Sunday, China reported 2,125 local cases of Covid-19 in 58 cities, the fourth straight day of more than 1,000 local infections reported daily in the country, according to the National Health Commission (NHC).

In the Shenzhen technology hub, all businesses, except for those deemed essential or supplying to Hong Kong, have suspended operations or implemented a work-from-home policy.

In addition to Shenzhen, local authorities in the northeastern province of Jilin have also banned residents from leaving or traveling since Monday. The province of 24 million is home to the industrial heartland of Changchun, where Toyota and Volkswagen jointly operate their car factories. with the state-owned automaker FAW Group.

Shanghai, the country’s largest business center, has also imposed strict measures following a spike in Covid cases, closing schools and cinemas and restricting travel to the city.

The restrictions came just months after China shut down the northwest city of Xi’an, impacting core business operations, including those of Samsung and Micron, the world’s two largest chipmakers.

These strict measures taken to combat the pandemic have hit China’s economy hard in recent times. Earlier this month, the government set an economic growth target of around 5.5% for 2022, the lowest official target in decades.

The history will be updated.

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