Coronavirus: China economy contracts amid zero-Covid policy

China’s economy contracted sharply in the second quarter of this year as widespread coronavirus lockdowns hit businesses and consumers.

Gross domestic product (GDP) fell 2.6% sequentially in the three months to the end of June.

Major cities across China, including the major financial and manufacturing hub of Shanghai, have been in full or partial lockdown during this period.

This comes as the country continues to pursue its “zero Covid” policy.

On an annualized basis, the world’s second largest economy grew 0.4% in the April-June quarter, beating expectations of 1% growth.

“Q2 GDP growth was the worst since the pandemic began as lockdowns, particularly in Shanghai, severely impacted activity earlier in the quarter,” Tommy Wu, senior economist at Oxford Economics, told the BBC.

Official figures for the last month showed an improvement in the country’s economic performance after many of these restrictions were lifted.

“However, June data was more positive as activity picked up again after most lockdowns were lifted. But the real estate downturn continued to weigh on growth,” added Mr. Wu.

Meanwhile, Jeff Halley, senior market analyst for Asia-Pacific at trading platform Oanda, told the BBC he also saw some bright spots in today’s economic data out of China.

“GDP was worse than expected, but unemployment fell to 3.5% and retail sales were impressive,” he said.

“Financial markets are likely to focus on the retail numbers, which seem to show the Chinese consumer in better shape than expected,” added Mr Halley.

However, many analysts do not expect a quick economic recovery for China as the government continues its strict zero-Covid approach to slowing the spread of the coronavirus.

The country’s once booming real estate market is in a deep slump and the outlook for the global economy has deteriorated sharply in recent months.

GDP measures the size of an economy. Measuring its expansion or contraction is one of the most important ways of measuring how well or poorly an economy is doing, and is closely watched by economists and central banks.

It helps companies assess when to expand and hire more staff, or to invest less and downsize their workforce.

Governments also use it to guide decisions in everything from taxes to spending. Along with inflation, it is an important indicator for central banks when considering whether to raise or lower interest rates.