China’s economy has seen further slowdown, following the weakest growth in over three years in the second quarter, with economic activity cooling across the board in July. Analysts point to deep-seated and persistent structural issues facing the Chinese economy, as the contradiction of “strong supply and weak demand” remains unresolved.
On the afternoon of August 17th, data released by the Chinese National Bureau of Statistics revealed that in July, the year-on-year growth rate of industrial value added for enterprises above a designated scale slowed to 4.5%, consumption growth dropped to 0.6%, and fixed-asset investment for the first seven months saw a larger decline of 6.7%, all falling short of expectations.
The data from the National Bureau of Statistics shows that in July, industrial value added for enterprises above a designated scale saw a 4.5% increase year-on-year, compared to 5.3% in June. This figure also fell below the 4.8% growth anticipated by economists surveyed by The Wall Street Journal.
The total retail sales of consumer goods increased by only 0.6% year-on-year in July, down 1 percentage point from June, and lower than the market’s expectation of 1.5%.
Financial commentator Xiao Yi told Epoch Times that the aforementioned data indicates a significant slowdown in overall industrial growth, with residents lacking confidence in future income and employment prospects.
Chinese affairs expert Li Tingqian told Epoch Times that consumption is very weak, with social consumer goods retail sales totaling a mere 0.6% year-on-year increase in July according to official data, reflecting a complete retreat of the past “summer economy” trend.
The statistics bureau’s data also shows that fixed-asset investment for the first seven months fell by 6.7% year-on-year, a further widening of the decline compared to the first half of the year (which saw a 5.7% decrease), falling short of economists’ previous expectation of a 6.0% decrease. Real estate development investment fell by 19.2% year-on-year, a 1.2 percentage point increase in decline compared to the first half of the year (which saw an 18% decrease), illustrating prolonged weakness in investment.
Li Tingqian pointed out that the significant year-on-year decline in national fixed-asset investment indicates that investment in industries beyond real estate is also decreasing. Not only is private investment declining, but the previously predominant government-led infrastructure projects driving the economy are now losing steam.
He further stated, “In fact, the role of fixed-asset investment in boosting the economy has greatly diminished, with long investment cycles and low returns. The key issue is that many local governments lack the capacity to invest, and the private sector is unwilling and hesitant to do so. Besides the traditional large-scale infrastructure led by the central government, local governments are changing their strategies to revitalize existing investments as a means of survival. For local governments, staying ‘alive’ is more important.”
Xiao Yi believes that both business and local government investment capabilities are weakening, indicating a lack of confidence in future economic growth for both parties.
In addition, the urban surveyed unemployment rate in July rose to 5.2%, higher than the 5.0% in June.
The National Bureau of Statistics stated that the industrial economy in July faced short-term influences such as high temperatures, heavy rainfall, and the flood season but remained generally stable. It also mentioned that due to the impact of short-term factors both domestically and internationally, the growth rates of major production indicators in July had fallen. The complex and variable external environment, along with the prominent contradiction of strong supply and weak demand domestically, have made it difficult for some enterprises to operate, and the foundation of the economy’s stability still needs to be consolidated.
In response to this, Xiao Yi stated that while high temperatures, heavy rains, and the flood season may have affected industrial production in July, attributing the economic slowdown mainly to weather conditions is a case of downplaying the deeper, persistent structural issues reflected in real estate, consumption, investment, and employment.
Xiao Yi pointed out that the data released by the National Bureau of Statistics shows a clear deceleration of China’s economy in the second half of the year, with the “strong supply and weak demand” contradiction still unresolved.
He analyzed, “The data on major durable consumer goods also confirms weak domestic demand. From January to July, real estate development investment saw a 19.2% year-on-year decrease, an increase of 1.2 percentage points in decline compared to the first half of the year; new construction area decreased by 24%, and sales area of new commercial buildings dropped by 11.8%. In July, China’s retail volume of passenger cars decreased by approximately 21% year-on-year, marking the tenth consecutive month of decline, while overseas exports saw significant growth, described by the media as ‘export supporting domestic demand’.”
China Finance Network stated that China’s economy started the second half of the year on a weak note, with industrial production, consumption, and investment data for July all falling below market expectations, leading to increased pressure for policy stimulus. Economists believe that the current weak domestic demand has made economic growth highly reliant on exports, hence the probability of implementing measures to stabilize growth in the coming weeks and months, including possible issuance of special bonds and policy financial instruments to boost confidence among enterprises and residents.
On the overseas social platform X, a financial account self-claiming to have 30 years of experience in macroeconomic and technology industry research, under the name “Tigris | Professor Can Give Lectures and Is a Good Teacher”, analyzed, “Will there be a new round of stimulus? No. Even if there is stimulus, it won’t work. It’s very simple: the capital market has money but no one dares to invest. The grassroots people have no money and worry about living, aging, sickness, and death; private enterprises dare not invest because it’s not their own; state-owned enterprises dare to invest, but the more they invest, the worse the returns, squeezing out private enterprises; most local governments are basically bankrupt. Any policy and stimulus that is not from the residents’ consumption side is like drinking poison to quench thirst.”
“This core data, despite being fabricated, still shows that China is on the brink of collapse. The ten-year government bond yield is 1.6%, money is already very cheap, but there are not enough people who believe that borrowing money will lead to a better future.” The blogger stated, “These are all important signals of an economic collapse.”