China’s 6.3% GDP growth in Q2 puts pressure for more policy support
CHINA’S economy grew at a frail pace in the second quarter, although the annual figure was flattered by base effects, with overall momentum faltering rapidly due to weakening demand at home and abroad.
On a quarter-on-quarter basis, GDP grew just 0.8 per cent in the April-to-June period, according to data released by the National Bureau of Statistics on Monday (Jul 17). This was down from an expansion of 2.2 per cent in Q1. Analysts in a Reuters poll had expected a 0.5 per cent increase in Q2.
On a year-on-year basis, GDP expanded 6.3 per cent in Q2, accelerating from 4.5 per cent in the first three months of the year. But the rate was below the forecast for growth of 7.3 per cent.
The annual pace was the quickest since Q2 2021, but the reading was heavily skewed by economic pains that were caused by stringent Covid-19 lockdowns in Shanghai and other major cities last year.
“China’s Q2 GDP growth surprised on the downside, with headline reading at 6.3 per cent… Obviously, we might have to embrace a new wave of growth-outlook downgrade in the next couple of days,” said Zhou Hao, an economist at Guotai Junan International.
For June alone, China’s retail sales grew 3.1 per cent, slowing sharply from a 12.7 per cent jump in May, Monday’s data showed. Analysts had expected growth of 3.2 per cent.
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Industrial output growth unexpectedly quickened to 4.4 per cent last month from 3.5 per cent in May, but demand remains lukewarm amid a bumpy post-Covid economic recovery.
Recent data showed a rapidly faltering post-Covid recovery as exports fell the most in three years due to cooling demand at home and abroad, while a prolonged downturn in the key property market sapped confidence. The weak overall momentum has raised expectations that policymakers will need to do more to shore up the world’s second-biggest economy.
Authorities are likely to roll out more stimulus steps, including fiscal spending to fund big-ticket infrastructure projects, more support for consumers and private firms, and some property policy easing, policy insiders and economists said. But analysts say a quick turnaround is unlikely.
Zhou noted that China’s 5 per cent growth target still “looks very attainable”. While the country is seen to be on track to meeting that goal, a deeper slowdown could stoke more job losses and fuel deflationary risks, further undermining private-sector confidence, economists said.
Some economists have blamed the “scarring effects” caused by years of strict Covid measures and regulatory curbs on the property and technology sectors – despite recent official efforts to reverse some curbs to support the economy.
With uncertainty running high, cautious households and private businesses are building up their savings and paying off their debts rather than making new purchases or investments.
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