The Chinese economy shrank by a seasonally adjusted 2.6% on quarter in the three months to June 2022, compared with market estimates of 1.5% drop and after an upwardly revised 1.4% growth in the previous quarter. This was the first quarterly contraction since the first quarter of 2020, when an outbreak of COVID-19 in Wuhan, first detected in late 2019, turned into a full blown epidemic.

Full or partial lockdowns were imposed in major Chinese cities from March through May of 2022, including the financial and commerce hub of Shanghai. China’s statistics agency highlighted that the downward pressure on the economy has increased significantly from the June quarter onwards, with severe impacts from unforeseen factors. “The foundation of sustained economic recovery is not stable,” it said, amid rising inflation risks globally, tightening monetary policies in major economies, and the impact of domestic virus outbreaks.