Shanghai’s economy shrank almost 14% as lockdown took toll

Shanghai’s economy shrank almost 14% in the second quarter when a two-month lockdown in the financial and trading hub shuttered factories, curbed consumer spending and disrupted operations at the world’s largest port.  

Regional data released by China’s statistics bureau Friday showed the two places with the strictest virus curbs last quarter -- Shanghai and Jilin -- had the the worst economic performance, another sign of the damage the government’s Covid Zero policy has had on the world’s second-largest economy. 

Shanghai’s economy contracted 13.7% from a year ago, the biggest decline among China’s provinces and municipalities. In Jilin -- which also imposed a lockdown to curb Covid infections -- GDP shrank 4.5%. General public budget revenue in Shanghai slumped 12.9% in the first half of the year, compared with a 4.7% increase nationwide, showing the hit to government finances from the Covid controls. 

Economic output in Beijing, which imposed less severe restrictions in the second quarter, fell 2.9%, the third-biggest contraction among all provinces.

The dismal performance in Shanghai and Jilin helped drag down overall growth in the economy to 0.4% in the three months through June, the slowest pace since the initial virus outbreak and lockdown in Wuhan in early 2020. 

Even though retail sales rebounded in June with the easing in Covid outbreaks and restrictions, infections have continued to pop up and fears have grown of a new tightening in controls. That’s a threat to the recovery and makes the government’s growth target of around 5.5% difficult to meet.