A poll conducted by the Caixin news service on Monday found China’s economy foundering as the second half of 2022 began, with slower manufacturing activity, higher unemployment, and a depressed real estate market.

China’s weakening economy reduced its demand for oil, combining with downbeat manufacturing data from other countries to bring oil prices down by four percent.

Caixin’s poll found that Chinese manufacturing activity slowed considerably in July — or possibly even contracted — after the latest round of coronavirus lockdowns ended in June and produced an exuberant surge in production.

China Beige Book International (CBBI), a consulting firm for investors, said July factory output slowed to levels not seen since mid-2020 and retail sector unemployment hit a two-year high – signs that Chinese urbanites and corporate managers “simply do not believe that their Covid Zero nightmare is over.” 

“Retailing is in the most trouble. Firm death is almost certainly occurring in the sector now,” CBBI chief economist Derek Scissors said, highlighting fears that coronavirus lockdowns could strike again at any moment, without warning.

Other economic surveys found the Chinese real estate market slipping by 33 percent after an 89-percent surge from the end of lockdowns in June, Gross Domestic Product (GDP) growing by only 0.4 percent in the second quarter, and consumers nervous despite a modest 3.1 percent post-lockdown gain in retail spending.

Consumer spending may be stagnant because weak factory output and highly-publicized layoffs leave many Chinese workers worried about their jobs. Some are taking advantage of a real estate bubble to sell their homes for cash, making up for incomes lost due to downsizing and layoffs. 

Analysts compared the current situation unfavorably to China’s recovery from a market collapse and banking scandals in 2015 because consumer spending kept growing in 2015, while it has become stagnant today. Also, today’s real estate industry has wide-ranging and much-discussed problems that could prevent it from rescuing the remainder of the consumer economy.

When China’s troubled real estate giant, the China Evergrande Group, did not deliver its promised $300 billion restructuring plan over the weekend, analysts told CNBC the loss of confidence in real estate may create a “negative feedback loop” that drags down the rest of the Chinese economy.

The Chinese real estate industry is already in the grip of an unusual “mortgage revolt,” with homeowners refusing to make their payments because they think developers will not finish construction and renovation projects.

“If this problem is not handled properly, it will have a profound impact on the economy, including the government balance sheet, the banks’ balance sheet as well, and households,” Standard Chartered economist Shuang Ding told CNBC.

Ding noted the real estate crisis could do significant damage to Chinese government finances, as provincial governments obtain much of their revenue by taxing land sales. The looming collapse of titanic Evergrande is choking the market by frightening investors, while individual home buyers are expressing their frustrations through the mortgage revolt.