The Covid-19 pandemic continues to have serious consequences in China. As the country experiences its strongest outbreak since the virus emerged, China unveiled its worst economic performance in two years on Monday. Thus, retail sales, the main indicator of household spending, recorded last month a decline of 11.1% over one year, announced the National Bureau of Statistics (BNS), for the second consecutive month after a drop of 3.5% in March. Particularly watched by the authorities, the unemployment rate stood at 6.1% in April and is approaching the absolute record of 6.2% in February 2020.

These figures can be explained in particular by the intensification of screening and health measures, which have greatly affected travel and penalized consumption, while the hasty confinement of Shanghai in April is paralyzing supply chains. The 25 million inhabitants of the Chinese economic capital remain subject to draconian restrictions, at a time when the city of Beijing is strengthening its anti-Covid measures, after a rebound in positive cases, while the majority of the 22 million Residents can still leave their homes, except for a few confined neighborhoods. The fear of confinement and the closure of non-essential businesses as well as public places are seriously weakening activity.

Migrant workers missing from the calculations

However, the index paints an incomplete picture of the situation, unemployment being calculated for urban dwellers only and de facto excluding the millions of migrant workers, who are particularly vulnerable. The goal of the Chinese state this year is to create nearly 11 million jobs, a figure down from 2021 (12.69 million). But this criterion does not provide any information on the number of jobs destroyed due to the health crisis. At the same time, industrial production fell by 2.9% year on year in April, compared to an increase of 5% in March.

The shutdown of Shanghai is greatly disrupting supply chains, the port metropolis is a key entry and exit point for goods in China. Its confinement has “a considerable impact” which “threatens” world trade, warned economist Raymond Yeung, of ANZ bank. Especially since the strengthening of health checks is an aggravating factor which leads to "logistical delays", observes economist Tommy Wu, of the firm Oxford Economics.

An upcoming recovery?

The expert from Oxford Economics also indicates that household consumption is “even harder hit” by health measures, while Beijing has long relied on domestic demand to stimulate its economy. As for investment in fixed assets, its growth slowed down over the first four months of the year to 6.8% against 9.3% at the end of March, according to the SNB. However, the spokesman for the National Bureau of Statistics was reassuring by indicating that the impact of the Covid on activity will be “short-lived”, announcing an imminent recovery.