China's Economic Growth Slows in Second Quarter
During the period from April to June, China's economic expansion experienced a marked slowdown, with domestic demand weakening and the ongoing conflict in Iran affecting oil prices. Despite robust export performance, the world's second-largest economy grew by only 4.3% in the second quarter, missing Beijing's annual growth target. This follows a 5% rise in GDP during the first quarter.
Recent data revealed that China's exports surged by 27% in June compared to the previous year. However, in March, China adjusted its growth target to a range of 4.5%-5%, the lowest since 1991, allowing for acknowledgment of underlying economic weaknesses.
Impact of Global Factors
The second quarter GDP figures are the first comprehensive data set since the Iran conflict began on February 28. This period marked the slowest quarterly growth since the end of 2022, as China emerged from stringent Covid-19 restrictions. The National Bureau of Statistics highlighted increased external instability and uncertainties, along with an imbalance between supply and demand domestically.
Additional data released on Wednesday underscored the economic hurdles faced by Beijing, such as a persistent downturn in the property market and sluggish consumer spending. While new home prices fell by 0.1% in June, this was a slower decline compared to the previous month. On a positive note, retail sales increased by 1% in June, recovering from a 0.6% drop in May.
Analysts' Perspectives
Fabien Yip, a market analyst at investment platform IG, noted that Chinese businesses are absorbing higher costs for energy and raw materials due to insufficient consumer demand. She warned that prolonged conflict in Iran could exacerbate these challenges.
Meanwhile, Julian Evans-Pritchard, head of China economics at Capital Economics, suggested that the economic deceleration might be more related to the revised growth target rather than a sudden change in economic conditions. He indicated that the new target allows authorities to acknowledge existing weaknesses.
"This may largely represent a greater willingness to acknowledge pre-existing weakness rather than a sudden deterioration in underlying growth," Evans-Pritchard remarked, highlighting that the official figures now align more closely with Capital's own estimates.
Positive Indicators
Despite these challenges, the June data provided some positive signs. Customs reports showed a boost in tech exports driven by increased global demand for semiconductors used in AI data centers. Additionally, the rising popularity of Chinese electric vehicles (EVs) significantly contributed to export figures, with monthly car exports exceeding one million for the first time.
Source: Original Article
