China's economy is in bad shape, and the downturn may continue for a while

China is facing serious economic trouble. The country's economic growth has stalled, the level of youth employment has reached a peak, the real estate market is on the verge of collapse, and companies are struggling with persistent supply chain disruptions. 

The state is trying to cope with the impact of severe drought, while the real estate sector is under pressure from excessive debt. But the situation is greatly exacerbated by Beijing’s adherence to a rigid zero-Covid policy. China may abandon the chosen tactic this year, but there is no indication of it so far. 

Eight megacities have imposed a full or partial lockdown in the past two weeks. The population of these vital transport and industrial centers totals 127 million people. 

Since late August, at least 74 cities in China have been placed under lockdowns, impacting more than 313 million residents. CNN came to this conclusion based on data published by the government. According to Goldman Sachs estimates last week, cities affected by the quarantine-related restrictions account for 35% of China's gross domestic product (GDP).

The Covid-19 restrictions that were re-imposed recently indicate China's uncompromising battle with the virus with the strictest control measures, regardless of the damage they may cause.

As stated by Raymond Yeung, chief Greater China economist for ANZ Research, China's economy will continue to slow within the next few months. 

Tighter social distancing restrictions will lead to lower consumption and investments during the "Golden September, Silver October" period, which is traditionally the peak season for real estate sector.

Meanwhile, the sharp global recession does not bode well for China's economy either. It is due to the fact that weakening demand from the U.S. and European markets will put pressure on Chinese exports.

According to Raymond Yung's forecast, China's full-year growth outlook is only 3%, which is well below Beijing's official target of about 5.5%. Other analysts hold more pessimistic views, and their forecasts range from 2.5% to 3.0%.