According to economic data, China’s economic activities are undergoing an overall cooling phase and losing momentum. Official figures released by the Chinese government indicate a decline in industrial output and retail sales in August, as well as an accelerated drop in housing prices. The official economic growth target now seems increasingly out of reach.
Data released by the Chinese National Bureau of Statistics on Saturday, September 14, revealed that industrial value-added in China grew by 4.5% in August year-on-year, lower than the 5.1% in July and below the analysts’ average prediction of 4.7%. This marks the fourth consecutive month of slowdown, the longest since September 2021.
This signals that despite China’s notorious habit of falsifying economic data, even the official figures have to acknowledge the continuous deceleration in industrial production, indicating that the most resilient sectors of the Chinese economy have lost momentum.
While it was the peak of summer vacation travel season, total retail sales of consumer goods, a key indicator of consumption, only grew by 2.1% year-on-year, down from 2.7% in July and below the analysts’ average prediction of 2.6%.
Both fixed asset investment and real estate investment have been disappointing. Data shows that the growth rate of fixed asset investment is the slowest since last December, while the real estate market continues to decline.
According to Reuters calculations based on data from the Chinese National Bureau of Statistics, new house prices in China saw a year-on-year decline of 5.3% in August, the largest drop since May 2015. In comparison, the drop in July was 4.9%.
On a monthly basis, new house prices have continued to decline for the 14th consecutive month, with a 0.7% decrease, consistent with the drop in July.
Raymond Yeung, Chief China Economist at ANZ Banking Group, stated, “The data for August basically rules out the possibility of achieving the 5% official growth target for 2024 unless the top leadership of the Chinese Communist Party is willing to roll out a rocket-fired stimulus plan.”
Mizuho Securities Asia revised down their 2024 China GDP growth forecast from 4.8% to 4.7%, citing “insufficient policy implementation by officials.” Prior to this, many international financial institutions have also lowered their predictions for Chinese economic growth.
Xing Zhaopeng, Senior Strategist at ANZ Banking Group, said, “The growth momentum is slowing down… the bottleneck is still domestic demand.”
China’s refining production has declined for the fifth consecutive month, with crude steel production in August down 6.1% from July, indicating weak demand.
Zhang Dawei, an analyst at China’s Centaline Property, noted that the Chinese real estate market is still gradually bottoming out, and it will take some time for homebuyers’ demand, income, and confidence to recover.
A Reuters survey predicts that the Chinese property market will continue to be volatile in the short term, with a forecasted 8.5% decline in house prices in 2024 and a further 3.9% decline in 2025.
The housing crisis has led to what analysts call a two-speed economy, with rapid growth in exports, especially in terms of shipments, while domestic demand remains sluggish.
Analysts have warned that China’s two-speed economy is facing increasingly significant risks, with insufficient domestic demand and an increase in exports exacerbating tensions with trade partners.
Goldman Sachs stated in a research report, “Actual exports have grown by 14% in the past year. If the trade surplus continues to expand further, trade partners may impose more tariffs on China.”
(This article draws reference from reports by Reuters, Bloomberg, and the Financial Times)