China’s economy unexpectedly slows as Covid outbreaks and property crisis bite | Chinese economy

China’s economy unexpectedly slowed in July, with the factory and retail sector squeezed by Beijing’s zero-covid policy. Asset crisisMeanwhile the central bank surprised markets by cutting key lending rates to revive demand.

July industrial production rose 3.8% from a year earlier, down slightly from June’s 3.9%, data from the National Bureau of Statistics (NBS) showed. That compared with a 4.6% increase expected by analysts in a Reuters poll.

Retail sales, which only turned positive in June, rose 2.7% from a year ago, below analysts’ forecast of 5% growth and the 3.1% growth seen in June.

The world’s second-largest economy escaped contraction in the June quarter Lockdown of commercial hub ShanghaiA deep slump in the property market and continued soft consumer spending.

However, risks to development abound as many Chinese cities are destined to become manufacturing hubs and popular tourist destinations. Lockdown measures in July After new outbreaks of more widespread omicron variation were detected.

“The risk of stagnation in the global economy is increasing, and the foundations for domestic economic recovery are not yet solid,” the NBS warned in a statement.

Property sector, it has more Rocked by mortgage defaults This weighed on buyer sentiment, which worsened in July. Property investment fell 12.3% in July, the fastest rate this year, while the fall in new sales deepened to 28.9%.

As Chinese policymakers try to shore up a fragile recovery and eradicate emerging Covid clusters, the economy is expected to miss its official growth target this year – about 5.5% – set for the first time since 2015.

“All economic data disappointed in July, with the exception of exports. Credit demand from the real economy remained weak, suggesting a cautious outlook in the coming months,” said Nie Wen, an economist at the Shanghai-based Hwabao Foundation, adding that Covid outbreaks and heat waves in July weighed on activity.

“Now achieving 5-5.5% growth in the second half is very challenging.”

Employment conditions remained tenuous. The nationwide survey-based unemployment rate fell to 5.4% in July from 5.5% in June, although youth unemployment remained stubbornly high, rising to 19.9% ​​in July.

order Stagnation to development, the central bank on Monday unexpectedly cut interest rates on key lending facilities for the second time this year. New yuan loans fell more than expected in July as companies and consumers remained cautious about taking out loans, data showed on Friday.

Wang Jun, an economist at Zhongyuan Bank, believes authorities will focus on implementing existing policies rather than rolling out aggressive new stimulus.

“We are now facing a general liquidity trap problem. No matter how loose the credit supply is, companies and consumers are wary of taking on too much debt,” Wang said. “Some of them are now paying off their loans early. This could mean a slowdown.”

Fixed asset investment grew 5.7% in the first seven months of the year, which Beijing hoped would boost growth in the second half as exports softened. Jump in January-June.

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