The Chinese economy grew by 4.8% year-on-year in Q1 2022, up from 4.0% in Q4 and higher than market expectations. However, the highly transmissible Omicron variant of COVID-19 has affected many regions in China, leading to tighter quarantine measures and full lockdowns in some cities since mid-March 2022. This has put pressure on economic growth in Q2, with 41 cities containing risk areas for over 10 days in April, representing 21.5% of China's population or 25.7% of GDP. Industrial production saw solid growth in Q1, but faced challenges from supply chain disruptions due to the spread of the Omicron variant. Domestic consumption remained weak, with retail sales declining by 3.6% in March, the first contraction since August 2020. The unemployment rate edged up from 5.5% in February to 5.8% in March. Manufacturing and infrastructure investments grew strongly in Q1, but the real estate market continued to slow down, with new home sales falling 13.8% and investment remaining flat in Q1.
