Stay informed with free updates by signing up for the Chinese economy myFT Digest. This service delivers the latest news directly to your inbox, keeping you up to date on the developments in the world’s second-largest economy.
In July, China’s industrial production grew at the slowest rate in four months, signaling a weak start to the third quarter. Official data from the National Bureau of Statistics showed a 5.1% year-on-year increase, slightly below economists‘ expectations. This slowdown was attributed to a deep property slump that has been affecting the economy.
Unemployment also rose in July to 5.2%, marking the first increase since February. President Xi Jinping has been focusing on boosting the high-tech manufacturing sector to support the economy amidst the property downturn, which has impacted household consumption and investor confidence.
The government has implemented incremental measures to stabilize the housing market and stimulate household demand, but has refrained from large-scale stimulus packages. Despite these efforts, other economic indicators such as soft factory activity, declining exports, and a decrease in bank loans to the real economy have pointed to ongoing weakness.
Goldman Sachs analysts anticipate more easing measures in the coming months to achieve the government’s economic growth target of 5% for the year. However, they caution that it may take time for these policies to take effect. The latest GDP growth figure of 4.7% in the June quarter fell short of expectations, highlighting the challenges facing the economy.
The NBS acknowledged the negative impacts of external factors on the economy and noted that domestic demand remains weak. Retail sales saw a slight improvement in July, but the two-track nature of the economy persists, with strong exports and manufacturing contrasting with subdued household demand.
New house prices in major cities dropped, reflecting the challenges in the property market. Fixed asset investment also disappointed, with slower growth than expected. Manufacturing investment showed strength, but overall investment was dragged down by a decline in property investment and weaker private sector and government investment.
Analysts expect the government to introduce more housing easing measures, but the slow recovery in demand may lead to a prolonged economic downturn. The steel industry, in particular, is facing challenges, with China Baowu Steel Group warning of the worst downturn since 2008 and 2015. Steel production volumes and cement output have declined, further highlighting the struggles in the industrial sector.
In conclusion, the Chinese economy faces multiple challenges as it navigates through a property slump and weak domestic demand. Stay informed with the latest updates to understand the evolving economic landscape and make informed decisions. Sign up for the Chinese economy myFT Digest to receive timely news and analysis directly to your inbox.
