China’s economic momentum is gradually diminishing, with stagnating consumer spending, accelerated contraction in fixed asset investment, and rising urban unemployment rate in July, indicating a comprehensive slowdown in various economic sectors.
On August 17, economic data that was originally scheduled to be released at 10 a.m. Hong Kong time was delayed by the National Bureau of Statistics of the Communist Party of China until 3 p.m., intensifying external concerns about the state of the Chinese economy.
The data shows that consumer spending remains weak. In July, total retail sales of consumer goods grew by 0.6% year-on-year, a decrease of 0.4 percentage points from June. On a monthly basis, total retail sales of consumer goods in July only increased by 0.06%.
Industrial value-added output of enterprises above designated size increased by 4.5% in July year-on-year, down by 0.8 percentage points from June. On a monthly basis, industrial value-added output in July grew by 0.11%, slower than in June.
In terms of investment, fixed asset investment for the first seven months of the year decreased by 6.7% year-on-year, expanding by 1 percentage point compared to the first half of the year. Real estate development investment in the first seven months dropped by 19.2% year-on-year, with residential investment down by 19.1%. During the same period, construction area for buildings decreased by 12.7%, residential construction area declined by 13%; new construction area decreased by 24%, residential new construction area down by 24.6%.
Sun Xiao, chief statistician of the National Bureau of Statistics of China, stated, “Issues such as insufficient effective demand, mismatches between production and sales, and severe cash flow pressures faced by some industries and enterprises still stand out.”
According to reports in Chinese media, Wang Qing, chief macro analyst at Orient Securities, analyzed the economic data and pointed out that this year’s growth in residents’ commodity consumption is significantly weak. Factors such as a high base for the same period last year and diminished effects of subsidy policies have led to a decline in sales of durable consumer goods under the six categories of trade-ins for new products, exerting a considerable drag on overall retail sales. Wang Qing also noted that the ongoing contraction in the real estate market continues to significantly impact consumer confidence.
Zhang Zhiwei, CEO and chief economist of Beoyin Asset Management, commented to CNBC that the latest data from China indicates the presence of “further downside risks” in the economy.
Jacqueline Rong, chief China economist at BNP Paribas, told Bloomberg that China’s data for July suggests that GDP may drop to 4.1%. China would need to achieve a GDP growth rate of 4.3% in the second half of the year to meet this year’s annual growth target.
Lynn Song, chief economist for Greater China at ING Bank, told Reuters that all data points are disappointing, and the deteriorating economic situation indicates that Beijing may need to introduce support measures in the coming weeks or months to stabilize economic growth.
The data from August 17 also revealed that the national surveyed urban unemployment rate in July was 5.2%, with the urban unemployment rate in 31 large cities also standing at 5.2%, both indicators showing a 0.2 percentage point increase from June.
However, a survey conducted by a team led by Professor Li Daokui of Tsinghua University showed that the broad unemployment rate in China is 10.2%, much higher than official figures.
This survey included calculations for the population of around 24 million long-term unemployed individuals who have not worked in the past two years and are no longer included in official labor force surveys. More than half of these long-term unemployed individuals are young people aged 16 to 24.
Li Daokui also believes that the tightening of investment and the high youth unemployment rate are the biggest obstacles for China to achieve its growth targets.