China’s economic woes have deepened further according to official data released over the past weekend by the Chinese Communist Party (CCP). The data revealed a rather bleak economic outlook, prompting Wall Street to lower its forecasts for China’s economic growth. Experts are indicating that China’s economic prospects in the second half of the year are either approaching a red light or already flashing one.
The statistics released by the CCP’s National Bureau of Statistics on Saturday, September 14th, showed that in August, the growth rates of retail sales, industrial production, and urban investment were all lower than what economists surveyed by Reuters had predicted: retail sales of consumer goods increased by only 2.1% year-on-year; industrial value added grew by 4.5% year-on-year, marking the fourth consecutive month of slowdown; the growth rate of fixed asset investment was the slowest since December last year, and housing prices saw the largest annual decline in nine years. These indicators highlight a widespread weakening of economic activity in China, signaling a loss of momentum.
Furthermore, China’s urban unemployment rate hit a six-month high at 5.3%. This latest round of disappointing economic data was issued by the CCP.
Helen Qiao, Chief Economist for Greater China and Head of Asian Economics at Bank of America, stated on CNBC’s “Street Signs Asia” program that employment security and income growth are key drivers of consumer spending, both of which are currently lacking in China.
Eswar Prasad, Professor of International Trade and Economics at Cornell University, expressed on CNBC’s “Street Signs Asia” show on Monday, “There isn’t much good news in the latest round of data, and this has been the pattern for the past few months.”
“Whether it’s long-term issues related to property prices or short-term issues with domestic demand, particularly private investment and household consumption, they haven’t been adequately addressed,” Prasad remarked.
He cautioned that China’s economic outlook for the second half of the year is now “flashing a red light or very close to it.”
Duncan Wrigley, Chief Strategist at Everbright Securities International, shared his perspective on CNBC’s “Squawk Box Europe” program, suggesting that China’s economy is undergoing a “slow, painful, and laborious adjustment.”
Prasad criticized the CCP government for being too slow in taking bolder measures to stimulate the economy.
“The use of monetary policy requires significant action, and action needs to be taken early, but we haven’t seen the Chinese government take either of these actions yet,” Prasad said. “I dare not say that the Chinese economy has fallen into a very dire situation, but it is heading in that direction.”
According to reports from The Wall Street Journal, economists warn that without more powerful stimulus measures to boost expenditure rather than expanding supply, China may face a period of destructive price declines and low growth.
“They seem to be struggling with bare hands,” said Katrina Ell, Director of Economic Research for the Asia-Pacific region at Moody’s Analytics in Sydney. “I see nothing that makes me optimistic.”
A series of dismal data in China reflects this anxiety: consumer confidence fell in July, August’s business surveys showed declining profits among Chinese manufacturers and increasing inventories, signaling that factory production speeds far outpace demand in China and globally. Car sales in August decreased for the fifth consecutive month. The yield on China’s 10-year government bonds dropped to a new low, indicating investor disappointment in the economic outlook.
Bank of America has lowered its forecast for China’s economic growth in 2024 to 4.8%, below the CCP government’s target of 5%. Mizuho Securities has revised its expectation for China’s economic growth this year from 4.8% to 4.7%. Following the CCP’s latest round of economic data release, Citigroup also revised its forecast for China’s economic growth down to 4.7%.