Baltimore Sun

Shutdowns cause China’s economy to shrink

- By Joe McDonald

BEIJING — China’s economy contracted in the three months ending in June compared with the previous quarter after Shanghai and other cities shut down to fight coronaviru­s outbreaks, but the government said a “stable recovery” is under way after businesses reopened.

The world’s second-largest economy shrank by 2.6%, down from the JanuaryMar­ch period’s already weak 1.4%, official data showed Friday. Compared with a year earlier, which can hide recent fluctuatio­ns, growth slid to 0.4% from the earlier quarter’s 4.8%.

Activity was “much weaker than expected,” Rajiv Biswas of S&P Global Market Intelligen­ce said in a report.

Anti-virus controls shut down Shanghai, site of the world’s busiest port, and other industrial centers starting in late March, fueling concerns global trade and manufactur­ing might be disrupted. Millions of families were confined to their homes, depressing consumer spending.

Factories and offices were allowed to start reopening in May, but economists say it will be weeks or months before activity is back to normal. Economists and business groups say China’s trading partners will feel the impact of shipping disruption­s over the next few months.

“The resurgence of the pandemic was effectivel­y contained,” the statistics bureau said in a statement. “The national economy registered a stable recovery.”

Data on factory output, consumer spending and other activity suggest overall growth was even weaker than the headline figure, Julian Evans-Pritchard of Capital Economics said in a report.

“Even accounting for June’s strength, the data are consistent with negative y/y (year-on-year) growth last quarter,” EvansPritc­hard wrote.

The slump hurts China’s trading partners by depressing demand for imported oil, food and consumer goods.

Repeated shutdowns and uncertaint­y about business conditions have devastated entreprene­urs who generate China’s new wealth and jobs.

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