Friday, July 12, 2024

China’s economy is losing momentum due to low industrial and consumption growth

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China’s economy is losing momentum due to low industrial and consumption growth

China’s industrial production and retail sales grew less than expected in April, signaling the economy lost momentum early in the second quarter and increasing pressure on politicians to shore up a shock post-Covid-19 recovery.

Data released by China’s National Bureau of Statistics on Tuesday showed industrial production grew 5.6 percent in April from a year earlier, up from 3.9 percent in March. But that was well below expectations for a 10.9 percent increase in a Reuters poll of analysts, although it represented the fastest growth rate since September 2022.

Retail sales rose 18.4% from 10.6% in March, marking the fastest increase since March 2021. Analysts had expected retail sales to grow 21%.

Other data released last week showed imports shrank in April, and bank loans fell more than expected, pointing to weak domestic demand, intensifying pressure on policymakers to support an economic recovery as global growth falters.

This means China’s economic recovery is still faltering since December 2022 when strict restrictions to contain “Covid” were lifted.

Fixed capital investment increased by 4.7 per cent on a year-on-year basis in the first four months of the year. This was lower than the expected 5.7 percent. This refers to spending on real estate, infrastructure, equipment or machinery, in sectors that the government relies on to stimulate activity.

China’s central bank kept interest rates unchanged on Monday, as expected, but markets are betting on more deflation in the coming months.

China’s central bank struck a reassuring tone after last week’s release of official figures showing inflation rose just 0.1 percent year-on-year in April. This is the lowest level since 2021. The central bank said, “Consumer prices continue to rise at a moderate pace…and economic activity continues…in the medium to long term…there is no basis to expect deflation. .”

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China is targeting growth of about 5 percent this year, one of its slowest growth levels in decades, although it said achieving that “will not be easy.” But Jiui Zhang, an economist at Pinpoint Asset Management, said, “Accepting a lower level leaves the government to maneuver.”

The unemployment rate among Chinese youth aged 16 to 24 reached 20 percent in April. The service sector is struggling to absorb millions of rural migrants moving to cities.

However, the urban-only unemployment rate fell to 5.2 percentage points (-0.1) in April from March.

Nadia Barnett
Nadia Barnett
"Award-winning beer geek. Extreme coffeeaholic. Introvert. Avid travel specialist. Hipster-friendly communicator."

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