China’s second quarter growth hints at “unbalanced” economic recovery Business and Economic News
GDP grew by 7.9%, but high raw material costs and supply chain constraints inhibited the growth momentum.
According to official data, due to slowing manufacturing activities, rising raw material costs and the new COVID-19 epidemic, which put pressure on China’s recovery, China’s economic growth rate in the second quarter was slower than expected.
Official data released on Thursday showed that gross domestic product (GDP) for the quarter from April to June grew by 7.9% year-on-year, which was lower than the 8.1% growth expected by Reuters in a survey of economists.
Compared with the record expansion of 18.3% between January and March, growth has slowed significantly, when the year-on-year growth rate was severely skewed by the downturn caused by COVID-19 in the first quarter of 2020.
Activity data in June slowed down from the previous month, but better than expected.
“These figures are slightly lower than our expectations and market expectations (but) I think the momentum is quite strong,” said Woei Chen Ho, economist at UOB Bank of Singapore.
“What we are more worried about is the uneven recovery we have seen so far. For China, the recovery of domestic consumption is very important… Retail sales have been quite strong this month, which may ease some concerns.”
Although the world’s second-largest economy has rebounded strongly from the COVID-19 crisis driven by strong export demand and policy support, data in recent months indicate that the momentum has weakened. Higher raw material costs, supply shortages, and pollution control are putting pressure on industrial activities, while the small-scale COVID-19 outbreak has curbed consumer spending.
After the People’s Bank of China said last week that it would reduce the cash reserves that banks must keep, investors are paying attention to the central bank’s latest policy announcement.
This move released approximately RMB 1 trillion (US$154.64 billion) to the system to support the recovery.
The National Bureau of Statistics (NBS) stated that on a quarterly basis, gross domestic product (GDP) grew by 1.3% from April to June, slightly higher than the 1.2% growth expected in a Reuters survey. The National Bureau of Statistics reduced the growth in the first quarter to 0.4% from the fourth quarter of last year.
Data from the National Bureau of Statistics also showed that China’s industrial output value increased by 8.3% year-on-year in June, which was lower than the 8.8% increase in May. Economists in the survey had expected a year-on-year growth of 7.8%. Retail sales in June increased by 12.1% year-on-year. Analysts in the survey had previously expected an increase of 11.0% after an increase of 12.4% in May.
“The domestic economic recovery is uneven,” Liu Aihua, an official with the National Bureau of Statistics, said at a press conference on Thursday.
“We also need to see that the global epidemic continues to evolve and there are many external uncertainties and instability.” She said.
Data earlier this week showed that China’s exports in June grew much faster than expected, but a customs official said that overall trade growth may slow in the second half of 2021, partly reflecting the uncertainty of the COVID-19 pandemic .
Economists surveyed by Reuters predict that GDP will grow by 8.6% in 2021, which will be the highest annual growth rate in 10 years and well above the country’s official growth target of more than 6%. China was the only major economy that avoided contraction last year, with an increase of 2.3%.
Premier Li Keqiang reiterated on Monday that China will not adopt flood-like stimulus measures.
However, economists surveyed by Reuters are expected to receive more support this year, and bank deposit reserve ratios (RRR) are expected to be further reduced in the fourth quarter.
Fixed asset investment in the first six months increased by 12.6% from the same period last year, compared with the forecast 12.1%, and the increase from January to May was 15.4%.