BEIJING—China’s economy contracted in the three months ending in June compared with the previous quarter after Shanghai and other cities were shut down to fight coronavirus outbreaks, but the government said a “stable recovery” is under way after businesses reopened.
Factories and offices were allowed to start reopening in May, but economists say it will be weeks or months before activity is back to normal. Economists and business groups say China’s trading partners will feel the impact of shipping disruptions over the next few months. China’s latest infection numbers are relatively low, but Beijing responded to its biggest outbreak since the 2020 start of the pandemic with a “zero-COVID” policy that aims to isolate every person who tests positive. The ruling party has switched to a “dynamic clearing” policy that quarantines individual buildings or neighborhoods with infections but those restrictions covered areas with millions of people.
Forecasters say Beijing is using cautious, targeted stimulus instead of across-the-board spending, a strategy that will take longer to show results. Chinese leaders worry too much spending might push up politically sensitive housing costs or corporate debt they worry is dangerously high.