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Chinese Growth Falters As Recovery Hopes Fade
July 24, 2023
The Chinese economy barely grew in the second quarter from the first quarter as youth unemployment reached a record high and consumers continued to pull back, dashing hopes of a post-pandemic boom.
China saw just 0.8% growth in the second quarter compared to the first three months of the year, which saw 2.2% quarterly growth. On a year-over-year basis, Chinese gross domestic product (GDP) grew by an impressive seeming 6.3%, but that notable figure is skewed because of the favorable comparison to the second quarter of 2022, when the growth collapsed amid the strict lockdowns brought on by Beijing’s “zero Covid” policy. Economists had been expecting a GDP expansion of 7.3%.
Beijing abandoned its strict Covid controls around the turn of the year, paving the way for Chinese consumers to boost the economy by spending some of the savings they have accumulated during the pandemic. However, those hopes may have been misplaced, as Chinese consumers continue to be wary about spending. Retail sales in June climbed just 0.2% from the month prior. Economists believe this caution reflects wider anxieties about the economy and job security.
China’s headline urban unemployment rate held steady at 5.2% in June, but the youth unemployment rate continued to climb, with joblessness among those aged 16 to 24 rising to 21.3% in June, a record high.
The nation’s troubled real estate market also continues to languish. Investment in buildings, machinery, and other fixed assets grew just 0.4% in June from the month before.
Given 2022’s relative weakness, China is still on track to hit its target of 5% GDP growth in 2023, but even that figure is lower than normal and notably modest for a country that has averaged GDP growth of 9% annually since opening its economy in the late 1970s.
