The Chinese dragon walks slower than expected. And even worse: than expected. Meanwhile, youth unemployment is at a record high.
China’s GDP grew by 6.3% year-on-year in the second quarter, below the 7.1% expected by analysts, the National Bureau of Statistics (ONE) announced yesterday. Weaker demand both in the domestic market and abroad is undermining the results and putting pressure on the authorities to launch new stimulus measures. The outlook complicates the goal of growing by 5% a year, as a greater slowdown is expected in the coming months. Although from a Western point of view a GDP advance of this magnitude seems very high, it must be considered that the figure is excessively distorted because it reflects the comparison with a quarter of 2022 in which there were still restrictions due to covid. But the momentum of reopening after the virus is losing steam: “The data suggests that the post-pandemic boom is clearly over,” according to Commonwealth Bank analyst Carol Kong.
“In the first half of the year, we face a complex and serious international environment, as well as arduous tasks to promote reform, development and guarantee stability in the country,” the statistics office said in a statement. The problem is that China cannot afford to grow much less, taking into account the size of the population and the economic goals set by the Chinese Government.
It was already reported recently that China had the largest drop in exports in three years. The authorities are now expected to launch new stimulus programs to boost activity, focused on public infrastructure and support for consumer and business spending. There will also be a relaxation in some regulations of the real estate market, which represents 20%-25% of the activity, according to Reuters. Home prices fell in June for the first time this year, Bloomberg points out.
In detail, China Evergrande Group, the world’s most indebted real estate developer, posted combined losses of more than $81 billion in two years amid a restructuring process. “The measures so far have not achieved 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, senior leaders meet to draw the lines for the remainder of the year, at which point measures could be announced. “At this rate of deceleration there is now a risk that the 5% growth target will not be achieved”, said Alvin Tan, of RBC Capital Markets.
A larger shutdown may translate into more lost jobs and risks of deflation. The youth unemployment rate (16-24) rose to a record 21.3% in June from 20.8% previously, as there were fewer job openings after students graduated. On the other hand, in the 25 to 59 age group, unemployment is only 4.1%.
