The Chinese economy is slower than expected. GDP grew by 6.3% year-on-year in the second quarter, below the 7.1% forecast by analysts, as announced on Monday by the National Statistics Office (ONE). Weaker demand in both the domestic and foreign markets undermines the results and puts pressure on the authorities to launch further stimulus measures. The outlook complicates the objective of growing 5% in the year, since a further slowdown is expected in the coming months.
The 6.3% advance is achieved compared to a quarter of 2022 in which there were still restrictions due to the covid. It improves the rate of 4.5% at the start of the year, but disappoints the market. Quarter over quarter it advances 0.8%, in line with expectations and less than the previous 2.2%. Post-virus reopening momentum is running out of steam: “The data suggests the post-pandemic boom is clearly over,” according to Carol Kong, an analyst at Commonwealth Bank.
“In the first half of the year, we faced a complex and serious international environment, as well as arduous tasks to promote reform, development and guarantee stability in the country,” the statistical office said in a statement, noting that the economy “showed good recovery momentum.” Until June, the greatest growth occurred in services, with a 6.4% increase, compared to 3.8% in industry or 3.3% in the primary sector.
Private sector investment fell by 0.2% in the semester, contrasting with the 8.1% growth of public investment. Despite this, industrial production grew by 4.4% in June, from the previous 3.5%, according to data offered today.
The authorities are expected to launch new stimulus programs to boost activity, focused on public infrastructure and support for consumer and business spending. Also a relaxation in some real estate market regulations, according to Reuters, which represents 20%-25% of the activity. Investment in properties fell by 7.9% up to June, four tenths above expectations. Housing prices fell in June for the first time this year, Bloomberg highlights.
Exports grew by 3.7% up to June, due to a decrease of 0.1% in imports. And in July, activity is still weak, if you look at the high-frequency data. “The measures so far have fallen short of what is needed to provide a significant boost to the economy,” according to Sheana Yue, China economist at Capital Economics.
At the end of the month, the high command meets to draw the lines for the remainder of the year, at which time measures could be announced. “At this rate of slowdown, there is now a risk that the 5% growth target will not be achieved,” said Alvin Tan of RBC Capital Markets.
A greater stoppage may translate into more job losses and deflation risks. The youth unemployment rate (16-24) grew to a record of 21.3% in June from the previous 20.8%, based on the data released this Monday, as there were fewer job offers upon graduation. In the 25 to 59 age bracket, unemployment is 4.1%.
