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The economy of China falls short of meeting growth forecasts.

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The economy of China falls short of meeting growth forecasts.
The economy of China falls short of meeting growth forecasts.

In Hong Kong, as the Associated Press (AP) reported, China’s economic growth in the second quarter of the year fell short of expectations, which has raised concerns about the increasing youth unemployment rate and the struggling property sector. As a result, there is a higher probability that the government will intensify its efforts to provide additional support for the struggling post-COVID-19 recovery.

The economy of second-largest global economy expanded by 6.3% on an annual basis during the April-June quarter. This growth rate was lower than the anticipated 7% or higher, as predicted by analysts, due to the sluggish pace of economic activity in the previous year.

The unemployment rate for individuals between the ages of 16 and 24 experienced a significant increase in June, reaching a new record high of 21.3%. This represents a slight rise from the previous month’s rate of 20.8%.

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The investment in property development, which plays a crucial role in driving both industrial and consumer demand, experienced a decline of 7.9% in the first half of the year compared to the previous year. This decline is concerning and indicates the ongoing weakness in an industry already slowing down before the pandemic. The government had taken measures to control excessive borrowing, further contributing to this decline.

The officials have acknowledged the presence of challenging factors affecting the economy. However, they have anticipated that the growth will still meet the ruling Communist Party’s official target of approximately 5% this year.

During a news conference on Monday, Fu Linghui, the spokesperson for the National Bureau of Statistics, stated that the government intends to make policy adjustments to achieve economic growth stability.

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According to government data released on Monday, the quarterly growth rate, commonly used to measure the performance of other major economies, stood at 0.8%. This figure aligns with the anticipated outcome but represents a significant decline from the 2.2% growth observed during January-June.

Analysts hold a significantly less optimistic view than the Chinese government regarding the prospects for the year. This is primarily due to the declining demand for Chinese exports in key global economies.

According to Moody’s Analytics economist Harry Murphy Cruise, the numbers represent a concerning outcome.

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According to the speaker, the recovery of China is deteriorating. China’s recovery is currently hindered by the lingering effects of the pandemic, which can be attributed to a significant sugar injection administered in the early months of 2023.

In a commentary, the individual stated that government spending is expected to assist crucial sectors such as real estate and construction. However, it should be noted that this measure alone may not be a comprehensive solution to the challenges faced by these industries.

China’s gross domestic product (GDP) experienced a growth rate of 6.3% from April to June, surpassing the 4.5% expansion observed in the preceding quarter.

The current strong growth can be attributed primarily to the fact that the economy experienced a growth rate of only 0.4% in April-June of 2022, compared to the same period in the previous year. This was mainly due to the implementation of strict lockdown measures in Shanghai and other cities in response to COVID-19 outbreaks.

In addition to increased government spending, regulators can reduce interest rates and implement other measures to enhance credit availability. It was stated in a report authored by Marcella Chow, a global market strategist at J.P. Morgan Asset Management.

According to Chow, the weak economic readings indicate a need for immediate escalation of policy support to stabilize expectations.

In the preceding year, there was a notable surge in growth due to the increased patronage of shopping malls and restaurants. This surge occurred after lifting “zero-COVID” restrictions, which had been in place for almost three years, in late 2022.

The growth target set by the government, which is approximately 5%, was perceived as a conservative objective. The achievement of this goal is contingent upon the economy sustaining a growth rate that closely aligns with its present level.

According to recently released data, there was a 12.4% decline in exports in June compared to the previous year. This decrease in exports can be attributed to a weakening global demand, which occurred due to the actions taken by central banks in the United States and Europe to raise interest rates to control inflation.

In June 2022, there was a 3.1% increase in retail sales compared to the corresponding period. Retail sales serve as a measure of consumer demand. According to analysts, while that aspect is considered a strength, it is not deemed sufficiently strong.

The industrial output, which quantifies the level of activity in the manufacturing, mining, and utilities sectors, surpassed the predictions made by analysts. It experienced a growth of 4.4% in June when compared to the corresponding month of the previous year.

The policymakers in China are currently not engaged in combatting inflation. However, they may face the challenge of deflation, which refers to a decline in prices resulting from a decrease in demand. The authorities have stimulated lending and spending in recent months, yielding varied outcomes.

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