July 15, 2022
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China’s major economic indicators fell deeply in April, the decline narrowed in May, and stabilized and rebounded in June.
On July 15, China’s National Bureau of Statistics released data showing that in the second quarter of 2022, GDP (gross domestic product) increased by only 0.4% year-on-year.
In contrast, the economy grew by 4.8% in the first quarter of this year, and fell significantly in the second quarter. At the same time, it dragged down the overall economic growth in the first half of the year, recording only 2.5% in the first six months, while China’s annual economic growth target is 5.5%.
As China’s most important economic center, Shanghai was under lockdown for most of the second quarter, so the market generally expected growth to slow sharply, but still more than expected.
Before the data was released, Caixin, Archyde.com and other media conducted surveys of domestic and foreign institutions and economists, and the market expected that the economic growth in the second quarter would be around 0.8%-1%. The 0.4% increase that was finally announced was below market expectations.
The growth of agriculture and industry both slowed down, among which agriculture was less affected, only 1.6 percentage points lower than the previous quarter, and industry dropped sharply by 4.9 percentage points, with an increase of only 0.9%.
The hardest hit was the service sector, which fell into contraction territory from 4% growth in the first quarter, down 0.4% year-on-year.
The deepest decline occurred in April’s consumption data, with total retail sales of consumer goods down 11.1% year-on-year.
However, officials from China’s statistics department are also emphasizing that the economy has begun to recover, as the main economic data has begun to pick up in June –
For example, the surveyed unemployment rate of the 25-59-year-old population, the main working-age group, was 4.5 percent in June, down 0.6 percentage points from May.
For another example, in June, the added value of industries above designated size increased by 3.9% year-on-year, 3.2 percentage points faster than the previous month.
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“The economy withstood the pressure and achieved positive growth in the second quarter,” said Fu Linghui, a spokesman for China’s National Bureau of Statistics. Major economic indicators fell deeply in April, narrowed in May, and stabilized and rebounded in June.
It is worth noting that the economic conditions faced by China and the United States are very different. The price increase in China is limited. The CPI rose by 1.7% year-on-year in the first half of the year, and the second quarter rose by 2.3% year-on-year. The United States is deeply troubled by high prices and has to raise interest rates to stabilize prices.
China saw a decline in consumption, down 0.7% year-on-year in the first half of the year, including a 4.6% year-on-year decline in the second quarter. Stimulus policies are urgently needed to boost demand.
Previously, China’s stimulus policies still showed some effects. For example, China’s automobile production and sales in June completed 2.499 million and 2.502 million respectively, a year-on-year increase of 28.2% and 23.8%, significantly exceeding market expectations.
image source,REUTERS
In the midst of the epidemic, all industries in Shanghai suddenly stopped, and it was necessary to centrally allocate materials to meet the needs of citizens.
“Zero policy” and the downturn in real estate drag down the recovery
“GDP growth in the second quarter was the worst since the early days of the pandemic, as lockdowns, especially in Shanghai, severely affected activities at the beginning of the quarter,” said Dongan Hu, senior economist at Oxford Economics. Tommy Wu told the BBC. However, he said the June data was more positive, with the economy picking up following most lockdowns were lifted, but the housing downturn continued to weigh on growth.
Xu Tianchen, an economist at the Economist Intelligence Unit (EIU), told the BBC Chinese that the rapid rebound in industry and trade in the second quarter allowed the overall economy to escape the fate of shrinking. In foreign trade, in particular, the trade balance (exports minus imports) contributed to the economy at its highest level since 2016, but part of the increase was due to weak imports, which reflected problems in Chinese demand.
Although overall growth in the second quarter was lower than expected, Jeff Halley, senior market analyst for Asia Pacific at trading platform Oanda, found some bright spots. With the unemployment rate down to 3.5% and the impressive performance of the retail sector, financial markets are likely to focus on retail data that appears to show Chinese consumers are doing better than expected, he said.
Facing the second half of the year, many analysts expect that China’s economy will not recover quickly, as the government may continue to adopt a strict “zero policy”, and the once prosperous real estate market is still in a deep downturn, and global economic expectations are also recently. weakened sharply for several months.
“In the second half of 2022, the real estate industry will still be at great risk,” Xu Tianchen believes. The recent refusal of homebuyers to repay loans for unfinished housing may lead consumers to stay away from the real estate pre-sale system, which will increase the Existing financing and liquidity pressures facing companies.
“We are particularly concerned regarding the health of small business owners.” Xu Tianchen said that while overall household income continued to grow in the second quarter, income from business operations declined. Small business owners have been hit harder by the containment measures, many of whom are at risk of having to close their doors amid the sudden and severe lockdown.