China’s economy saw a significant slowdown in Q2 2022, coming in significantly below expectations with a 0.4% growth compared to a 1.2% forecast and sparking recession fears across the globe.
The figures mark the country’s most devastating performance since Q1 2020, which saw China’s economy shrink 6.9% as the first wave of Covid-19 hit Wuhan.
Asian markets tumbled as the Shanghai SSE dipped 1.6% and the Hang Seng fell 2.4% in Friday’s trading session.
The Chinese economy suffered from continued lockdowns across its major production hubs as part of its “zero-Covid” policy, including Shenzhen, Beijing and Shanghai.
The lockdowns meant consumption and demand ground to a halt, sending ripple effects across the global markets as demand dried up for offerings from fashion to iron ore.
The reports signal potential trouble for global markets, as commodities companies, which the FTSE 100 remains anchored on, look set to suffer even lower commodities prices.
“China is one of Asia’s key growth powerhouses. We already knew that growth expectations were being pared back, but the latest GDP figure is the sort of pedestrian number one might expect from a developed Western nation,” said AJ Bell financial analyst Danni Hewson.
“This doesn’t bode well as recession fears grow in many parts of the world, and it could fuel speculation that China’s commodities appetite may wane if economic activity is stalling.”
Mining group Rio Tinto flagged concerns about its production linked to China’s slowdown, and mentioned a drop in consumption in China over Covid-19 lockdowns had served to send metals prices down.
“It’s no coincidence that Rio Tinto has given a warning about China in its latest production update, flagging uncertainties for this important commodities market,” said Hewson.
Meanwhile, high fashion retailer Burberry announced a dramatic slowdown in sales in its latest trading update, attributing its lower sales to lockdowns across its Chinese stores.
The news follows the impacts of Covid-19, the Ukraine war and rising inflation across the world’s biggest markets, with the Chinese economic data representing the latest recession alarm on the rising tide of economic concerns.
