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China’s Economy Continues to Falter, According to Recent Data
August 14, 2024
Tepid domestic consumption, rising unemployment, and ongoing troubles in the beleaguered property sector continue to cloud the outlook of the world’s second-largest economy.
A raft of official economic data from China’s National Bureau of Statistics continues to paint the picture of a faltering economy, despite a series of broad measures from Beijing last month that sought to head off a worsening economic picture. The data showed that fixed-income investment in the period between January and July slowed to 3.6%, down from 3.9%. Property investment has fallen 10.2% over the same period.
One seemingly bright spot was a year-over-year increase of 2.7% in retail sales in July. This exceeds economists’ estimates and is up significantly from June’s 2% annual increase. Looking under the hood of those figures, however, analysts have noted that while Chinese consumers are willing to spend on things like dining out and entertainment, they are pulling back on big-ticket purchases like cars and jewelry.
The most persistent drag on the Chinese economy remains its property sector. Home prices continue to fall at an accelerating rate. Data from Beijing shows that new home prices across the nation’s 70 largest cities fell 5.3% in July as compared to a year earlier. That is an acceleration from June’s 4.9% annual decline.
In recent months, Beijing has sought to clear out the nation’s housing backlog, which has seen millions of built but unsold units. A recent program from the central bank offered $42 billion in funding to Chinese banks to lend to state-owned firms which could then buy up these unsold units and persuade wary buyers to re-enter the market. As of the end of June, just 4% of that funding had been used, as economists believe the banks have no incentive to loan to state-owned companies.
The data also pointed to slowing industrial output, which grew by 5.1% annually in July, down from 5.3% in June, and unemployment continues to climb, jumping from 5.0% in June to 5.2% in July.
Following the release of the data, many investment banks lowered their growth projections for the Chinese economy. J.P. Morgan now anticipated GDP growth of 4.7% in 2024, down from an earlier estimate of 5.2%. China’s leadership continues to target an official growth rate of 5% this year.
