China: Low consumption leads to slower economic growth
2024-07-17
■ In China, the economic growth rate slowed from April to June, and the performance of consumption-related projects in June was sluggish.
■ From the perspective of economic stability, the inventory adjustment brought about by upgrading the financial structure has become particularly important.
According to the major economic indicators released on the 15th, the trend of the Chinese economy has been confirmed. The actual GDP growth rate from April to June was 4.7% year-on-year and 0.7% month-on-month, showing a slight decrease. The year-on-year rate was significantly lower than the government's target of 5%. Although the utilization rate of mining equipment above a certain scale (74.9%) has increased after two quarters, the overall trend is still declining, with a clear increase in idle equipment.
The monthly indicators in June showed that although the year-on-year growth of exports increased by 8.6%, the growth of mining industry production (5.3% year-on-year growth), retail sales (2.0% year-on-year growth), fixed assets investment (3.9% year-on-year growth excluding rural areas) and service industry production index (4.7% year-on-year growth) slowed down significantly. Retail sales decreased by 0.12% monthly, marking the first month-on-month decline in 11 months. The consumer price index only increased by 0.2% year-on-year, indicating that consumption remains weak. In addition, the manufacturing PMI (government-released value) remained below 50 for two consecutive months, indicating a contraction in activity, while the nonmanufacturing PMI fell to a six-month low. Although individual projects such as high-tech manufacturing production (up 8.8% year-on-year) have maintained significant growth, production activities, consumption, and investment in other industries have shown weakness, and the benefits of policy support are only reflected in specific sectors, leading to uneven economic growth.
In June, the decrease in real estate development investment (a year-on-year decline of 10.1% since the beginning of the year) and real estate sales (based on building area, a year-on-year reduction of 19.0% since the start of the year) narrowed. The housing support policies released on May 17th, including local government housing inventory, the establishment of a 300 billion yuan guarantee for housing purchase, low-interest loan funds, and the relaxation of housing loan regulations, have had particular effects. However, housing prices in 70 major cities (calculated by Reuters) show that the decline in newly-built housing (down 4.5% year-on-year) and second-hand housing (down 8.0% year-on-year) is expanding, and price adjustments have not yet shown signs of bottoming out.
The Third Plenary Session of the 20th Central Committee (the Third Plenary) will be held from the 15th to the 18th, and the economic policy guidelines of the current leadership will be announced. The development of "new quality productivity" is expected to be proposed, emphasizing reform measures such as upgrading the economic structure and reducing real estate and local government debt. In the process of economic structural transformation, inventory adjustment, employment adjustment, and the resulting sluggish demand harm economic activities. Therefore, how the Chinese government responds to these economic issues, which have relatively weak policy support compared to the cultivation of emerging industries, has become an essential consideration for economic stability.
■ From the perspective of economic stability, the inventory adjustment brought about by upgrading the financial structure has become particularly important.
According to the major economic indicators released on the 15th, the trend of the Chinese economy has been confirmed. The actual GDP growth rate from April to June was 4.7% year-on-year and 0.7% month-on-month, showing a slight decrease. The year-on-year rate was significantly lower than the government's target of 5%. Although the utilization rate of mining equipment above a certain scale (74.9%) has increased after two quarters, the overall trend is still declining, with a clear increase in idle equipment.
The monthly indicators in June showed that although the year-on-year growth of exports increased by 8.6%, the growth of mining industry production (5.3% year-on-year growth), retail sales (2.0% year-on-year growth), fixed assets investment (3.9% year-on-year growth excluding rural areas) and service industry production index (4.7% year-on-year growth) slowed down significantly. Retail sales decreased by 0.12% monthly, marking the first month-on-month decline in 11 months. The consumer price index only increased by 0.2% year-on-year, indicating that consumption remains weak. In addition, the manufacturing PMI (government-released value) remained below 50 for two consecutive months, indicating a contraction in activity, while the nonmanufacturing PMI fell to a six-month low. Although individual projects such as high-tech manufacturing production (up 8.8% year-on-year) have maintained significant growth, production activities, consumption, and investment in other industries have shown weakness, and the benefits of policy support are only reflected in specific sectors, leading to uneven economic growth.
In June, the decrease in real estate development investment (a year-on-year decline of 10.1% since the beginning of the year) and real estate sales (based on building area, a year-on-year reduction of 19.0% since the start of the year) narrowed. The housing support policies released on May 17th, including local government housing inventory, the establishment of a 300 billion yuan guarantee for housing purchase, low-interest loan funds, and the relaxation of housing loan regulations, have had particular effects. However, housing prices in 70 major cities (calculated by Reuters) show that the decline in newly-built housing (down 4.5% year-on-year) and second-hand housing (down 8.0% year-on-year) is expanding, and price adjustments have not yet shown signs of bottoming out.
The Third Plenary Session of the 20th Central Committee (the Third Plenary) will be held from the 15th to the 18th, and the economic policy guidelines of the current leadership will be announced. The development of "new quality productivity" is expected to be proposed, emphasizing reform measures such as upgrading the economic structure and reducing real estate and local government debt. In the process of economic structural transformation, inventory adjustment, employment adjustment, and the resulting sluggish demand harm economic activities. Therefore, how the Chinese government responds to these economic issues, which have relatively weak policy support compared to the cultivation of emerging industries, has become an essential consideration for economic stability.