China’s economic growth slowed than expected in Q2


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The Chinese economy grew more slowly than expected in the second quarter, as the slowdown in production activity, higher raw material costs and new outbreaks of COVID-19 reflected the momentum of the recovery.

Gross domestic product (GDP) rose 7.9% year-on-year in April-June, official data showed on Thursday, missing expectations for 8.1% growth in a Reuters economist survey.

Growth slowed significantly from a record 18.3% expansion in January-March, when the year-on-year growth rate was severely distorted by the decline caused by COVID in the first quarter of 2020.

Data on June activities slowed compared to the previous month, but exceeded expectations.

“The numbers were slightly below our expectations and market expectations (but) I think the momentum is pretty strong,” said UOB economist Woei Chen Ho of Singapore.

“Our bigger concern is the uneven recovery we’ve seen so far, and for China, the recovery in domestic consumption is very important … retail sales this month have been pretty strong and that may allay some concerns.”

Although the world’s second largest economy has recovered strongly from the COVID-19 crisis, spurred by solid export demand and political support, data in recent months point to some loss in momentum. Higher raw material costs, supply shortages and pollution control burden industrial activity, while small outbreaks of COVID-19 have covered consumption.

Investors are watching whether the central bank will switch to a lighter political stance after the National Bank of China announced last week that it would reduce the amount of cash that banks must hold as reserves.

The move released about 1 trillion yuan ($ 154.64 billion) of long-term liquidity to spur a recovery, and followed even as policymakers tried to normalize policy after a strong economic recovery from the coronavirus crisis to contain financial risks.

On a quarterly basis, GDP increased by 1.3% between April and June, the Central Bureau of Statistics said, only beating expectations for the Reuters poll to grow by 1.2%. The NBS revised the decline in the first quarter from the fourth quarter of last year to 0.4%.

NBS data also show that Chinese industrial production rose 8.3% in June from a year ago, slowing from 8.8% in May. Economists in the survey expected a 7.8% year-on-year increase. Retail trade increased by 12.1% compared to the year before in June. Analysts in the survey expected an increase of 11.0% after the May increase of 12.4%.

“Domestic economic recovery is uneven,” Liu Aihua, an NBS official, said at a briefing on Thursday.

“We must also see that the global epidemic continues to evolve, and there are many external instabilities and uncertain factors,” she said. Data earlier this week showed that Chinese exports grew much faster than expected in June, but a customs official said overall trade growth could slow in the second half of 2021, partly reflecting the uncertainty of the COVID-19 pandemic.

Economists in a Reuters poll expected GDP growth of 8.6% in 2021, which would be the highest annual growth in ten years and well above the country’s official growth target of more than 6%. China is the only major economy to have avoided a downturn last year, rising 2.3%.

Prime Minister Li Keqiang reiterated on Monday that China will not resort to incentives similar to floods.

Still, economists in a Reuters poll expected more support this year, predicting a further reduction in the reserve requirement rate (RRR) in the fourth quarter.

Investment in fixed assets increased by 12.6% in the first six months compared to the same period a year earlier, compared to the projected growth of 12.1% and a decrease of 15.4% in January-May.

Also read: Despite border tensions, India-China trade grows 62.7% to $ 57.4 billion in first half

Also read: China is expanding anti-listing measures by reviewing companies with large user data before the IPO

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