Recently, the National Bureau of Statistics of the Chinese Communist Party (CCP) released the economic data for May, describing the economy as showing a positive trend. However, experts have analyzed that the mainland economy is akin to a “zombie economy,” where it moves only when influenced by government intervention.
On June 17, the CCP Statistics Bureau published the macroeconomic data for May. The data showed that in May, total retail sales of consumer goods increased by 3.7% year-on-year, accelerating by 1.4 percentage points from the previous month, marking the first rebound since December last year. This data became a headline for the CCP to emphasize the “positive trend” in the economy.
Taiwanese senior political and economic scholar Wu Jialong pointed out that seasonal factors contribute to the increase in consumption data. During holidays, people tend to spend more, but increased spending now does not necessarily mean sustained levels of consumption in the future. This temporary boost in consumption during holiday periods creates a relatively high level of reported consumption.
American economist Huang Dawei commented that the consumption capacity overall seems to be decreasing compared to last year, as observed during the recent “May Day” holiday period. He highlighted that the purchasing power may be weakening.
East Money Chief Macro Analyst Wang Qing also noted that from January to May, total retail sales of consumer goods increased by 4.1% year-on-year, only half of the average growth rate in the two years before the pandemic, indicating persistent weakness in consumption.
The officially released data for the first quarter of this year showed that the per capita disposable income of urban residents in China grew by 5.3% year-on-year, slightly edging up by 0.2 percentage points from last year but significantly lower than the average growth rate of 7.1% over the past decade.
According to CCP Statistics Bureau’s economic data, industrial growth slowed in May, with investments across the three major sectors declining.
In May, the value-added of industrial enterprises above a designated size increased by 5.6% year-on-year but decreased by 1.1 percentage points compared to April. From January to May, fixed-asset investment in China grew by 4.0% year-on-year, slowing by 0.2 percentage points from the previous four months. Encouragingly, investments in all three major sectors declined. Infrastructure investment grew by 5.7% year-on-year, a decrease of 0.3 percentage points from the previous four months; manufacturing investment increased by 9.6% year-on-year, also seeing a decline in growth rate. Nationwide real estate development investment plummeted by 10.1% year-on-year, a 0.3 percentage point decrease from the preceding four months.
Huang Dawei emphasized that industrial and investment growth is likely to lag expectations. He pointed out that China’s industrial investment is mainly driven by exports and domestic demand. However, with the recent slowdown in exports to lucrative markets like Europe and the US and the potential tariffs, it is unlikely that industrial investment will continue to mitigate the effects of increased tariffs.
Huang further explained that the state of China’s economy reflects an increasing dominance of state-owned enterprises, which account for the majority of top companies. The state-owned sector’s share of income, profits, and assets are expanding, while the private sector is facing declining proportions.
Moreover, reports have exposed widespread financial fraud in Chinese state-owned enterprises. In recent months, six state-owned enterprises with backgrounds in state capital have been embroiled in financial scandals, with a combined exaggerated revenue exceeding 16 billion yuan.
Following the release of the May national economic data by the NBS, the spokesperson Liu Aihua expressed that the overall trend continues to show signs of improvement, with enhanced policy support and accelerated investment from the central budget and special bond issuance.
Wang Guochen, a research assistant at the China Economic Research Institute, described the Chinese mainland as a “zombie economy,” highlighting its dependency on government intervention for any movements, illustrating the underlying issues in the economy.
The concept of a “zombie economy” refers to a scenario wherein financial stability is threatened or a future crisis is imminent, often attributed to structural economic issues.
The manufacturing industry’s PMI continues to fluctuate around 50, influenced by the government’s injection of funds. Wu added that as long as the government’s financial support remains constant, industrial value-added and PMI will be stable.
He noted, “Because of the government’s intervention, there is this oscillation. Otherwise, what can they do? They cannot tell the public that the economy will worsen, right?”
Wu emphasized that the disappointing performance in the manufacturing industry and investments indicates an ongoing economic downturn in China, which has transitioned into a structural problem.
He pointed out that the government’s current measures are mainly focused on preventing economic collapse rather than revitalizing the economy. There seems to be a lack of effective measures to counteract the ongoing economic decline.
He believes that the government’s actions are geared towards maintaining social stability in anticipation of possible societal unrest or opposition due to economic instability.