Key economic indicators show China is having a hard time recovering from the pandemic - especially manufacturing and retail businesses. Could this economic slowdown spill over to Europe?

It seems China’s economic recovery is lower than expected - according to the National Bureau of Statistics, in July, industrial production increased by 3.8% and retail sales by 2.7% over the year, whereas economists forecast a rise of respectively 4.3% and 4.9%.

This “alarming” data recently led the People’s Bank of China to cut both one-year and seven-day lending rates by 10 basis points, to “maintain sufficient liquidity in the banking system” and therefore revive credit demand - a move that will have little impact on economic growth according to economists since Covid has made households and businesses reluctant to borrow. 

Yet the second global economy experienced a mild rebound in June, after the lifting of many restrictions - especially in Shanghai, which experienced a severe two-month lockdown earlier this year. But China’s strict “Zero-Covid” policy, requiring authorities to shut down businesses and lock down the population when major outbreaks occur - like currently in the resort island of Hainan - dims any growth outlook. 

These epidemic rebounds add to an already weakened economy: sluggish consumption, the uncertainty following the beginning of the war in Ukraine, the real estate’s crisis, etc. 

Remains to be seen if this economic slowdown will spill over to major European economies as China’s demand for manufactured goods slumps.   


Publié le 17 août 2022