Agencies
Arecent series of disappointing indicators has dampened expectations for China’s economic performance in July, signaling potential challenges for the remainder of 2024 and highlighting the need for more substantial stimulus measures beyond short-term fixes in the world’s second-largest economy.
Calls for additional growth-boosting strategies persist as officials grapple with the fallout from a post-pandemic recovery that fell short of expectations in 2023. Nevertheless, the government aims for around 5% economic growth this year.
The latest data points to a rocky start to the second half. On Tuesday, central bank data showed that in July, new bank loans plunged to a 15-year low, while other key gauges showed that export growth slowed and factory activity slumped as manufacturers grappled with tepid domestic demand.
The economy had already grown more slowly than expected in the second quarter, expanding 4.7% from a year earlier, as wary consumers remained reluctant to spend and trade ties with major markets became more tense. This suggests that a period of prolonged sluggishness is increasingly likely.
“The market consensus will move to the left side of the ‘around 5%’ growth target since the economy slowed in July and a forceful plan to support the economy seems to be missing,” said Xu Tianchen, senior economist at the Economist Intelligence Unit, which has kept its growth forecast at 4.7% since March.
On Thursday, China will release a raft of activity data. Economists polled by Reuters expect that retail sales grew 2.6% year-over-year last month, versus 2% in June, while industrial output was forecast to have grown more slowly and investment growth leveled off.
Officials will also release the latest reading on new home prices, which fell at the fasted clip in nine years in June despite a host of support measures aimed at luring back buyers and stemming a protracted property crisis.
Credit data this week showed household loans, mostly mortgages, contracted 210 billion yuan ($29.37 billion) in July, compared with a rise of 570.9 billion in June.
One of the main reasons people are not spending in China is that 70% of household wealth is held in real estate, a sector that has long been a major growth driver.
