share this article!

4 Minute Read by BEIJING, China (Reuters) – In the second quarter, China’s economy grew more slowly than projected, as decreasing manufacturing activity, increasing raw material costs, and fresh COVID-19 outbreaks slowed the recovery. PHOTO FROM THE FILE: On March 5, 2021, people stroll through Beijing’s central business district (CBD) in Beijing, China. Tingshu Wang/Tingshu Wang/Tingshu Wang/Tingshu Wang/Tingshu Official statistics showed on Thursday that gross domestic product (GDP) increased 7.9% year on year in the April-June quarter, falling short of economists’ estimates of an increase of 8.1 percent in a Reuters poll. The year-on-year growth rate was strongly skewed by the COVID-induced slump in the first quarter of 2020, therefore growth decreased dramatically from a record 18.3 percent rise in January-March. The pace of activity reduced in June compared to the previous month, but it still exceeded expectations. “The statistics were slightly below our and the market’s expectations (but) I believe the trend is reasonably solid,” said Woei Chen Ho of UOB in Singapore. “Our main concern is the uneven recovery we’ve seen so far, and for China, domestic consumption recovery is critical…retail sales this month were fairly good, which may ease some concerns.” While the world’s second-largest economy has made a successful recovery from the COVID-19 crisis, bolstered by strong export demand and policy support, recent data imply a slowdown. Industrial production is being weighed down by higher raw material costs, supply difficulties, and pollution controls, while tiny COVID-19 outbreaks have kept consumer purchasing in check. Investors are waiting to see if the central bank is softening its position following the People’s Bank of China’s announcement last week that banks must retain less cash as reserves. The action released around 1 trillion yuan ($154.64 billion) in long-term liquidity to help the economy recover, and it came as authorities moved to normalize policy following the strong recovery from the coronavirus outbreak in order to manage financial risks. Showcase ( 4 images ) The National Bureau of Statistics said that GDP increased 1.3 percent on a quarterly basis in April-June, slightly exceeding estimates of a 1.2 percent increase in a Reuters poll. Growth in the first quarter was revised down to 0.4 percent from the fourth quarter last year, according to the NBS. China’s industrial output increased 8.3 percent year over year in June, down from 8.8 percent in May, according to NBS data. Economists polled predicted a 7.8% increase year over year. In June, retail sales increased by 12.1% over the previous year. After a 12.4 percent gain in May, analysts in the poll predicted an 11.0 percent growth in June. At a briefing on Thursday, Liu Aihua, an official with the National Bureau of Statistics, said, “The domestic economic recovery remains uneven.” “We must also keep in mind that the worldwide epidemic is still evolving, and there are several external instabilities and unknown variables,” she added. China’s exports expanded far faster than predicted in June, according to data released earlier this week, but a customs official warned that total trade growth could drop in the second half of 2021, owing in part to concerns about the COVID-19 epidemic. In a Reuters poll, economists predicted an 8.6% increase in GDP in 2021, which would be the greatest annual growth in a decade and well over the country’s official aim of more than 6%. China was the only big economy to grow by 2.3 percent last year, avoiding a decline. On Monday, Premier Li Keqiang underlined that China would not use flood-like stimulus. Still, economists polled by Reuters expected more help this year, with a fourth-quarter reduction in the bank reserve requirement ratio (RRR) expected. Fixed asset investment increased by 12.6 percent in the first half of the year, compared to the same time a year ago, compared to a forecasted 12.1 percent increase and a 15.4 percent increase in January-May. 6.4665 yuan = $1 Kevin Yao and Gabriel Crossley contributed reporting; Roxanne Liu contributed additional reporting; Ana Nicolaci da Costa and Kim Coghill edited the piece./nRead More

share this article!