China’s economy expanded 6.3% in the second quarter from a year ago, falling short of market expectations as export demand remained tepid and sinking property prices sapped consumer confidence.
Compared with a year earlier, China’s GDP in the April-June period was 6.3% larger, the national bureau of statistics said on Monday, quickening from the 4.5% annual growth pace for the first three months of 2023. Economists had forecast growth to accelerate to 7.3%, according to a Reuters survey.
For the June quarter alone, growth slowed to 0.8% from a 2.2% quarter-on-quarter clip in the March quarter. That pace, though, exceeded predictions of a 0.5% expansion.
Over the past three decades, China’s growth has underpinned the global economy, providing a generation of new demand. Given last year’s extensive Covid lockdowns, 2023 is widely expected to see the country post a rapid rebound.
Now trailing only the US’s in size, China’s economy underpins prices for many commodities. It is also the source of an increasingly sophisticated array of goods from electric vehicles to aircraft and renewable energy plants and so weaker demand at home may result in more of those products being exported.
Australia, one of the rich world’s most China-dependent economies, is among the nations watching developments closely, Jim Chalmers, Australia’s top economic minister said on Sunday.
“The global economy is in a pretty precarious place right now,” Chalmers, Australia’s treasurer, told the ABC.
“The Americans are proving to be resilient, the Chinese economy has shown some worrying signs, Europe’s in recession and others as well.”
The trade sector recorded particularly weak figures; in June alone, it fell about 6%, with exports slumping 8.3% to just shy of 2tn yuan (US$280bn) and imports off 2.6%.
Also for June alone, China’s retail sales grew 3.1% compared with May’s 12.7% surge. Analysts had expected growth of 3.2%, Reuters said.
Louis Kuijs, S&P Global’s chief Asia economist, said the consumption numbers were among the disappointing ones.
“We had double-digit retail sales growth in April and May from a very low base, and that has petered out to have only 3.1% nominal retail sales growth, indicating consumers remain quite reluctant,” Reuters reported him as saying.
Betty Wang, ANZ’s senior China economist, said household deposits rose by almost 18% in the first half of 2023, compared with a year earlier, to a decade high.
“The outstanding amount is equivalent to more than 30 months of retail sales,” Wang said. “With few signs of a recovery in the property sector and an uncertain job outlook, the accumulation of household deposits suggests widespread pessimism among households.”
The moderate growth numbers are likely to stoke expectations of further government efforts to stimulate the economy to ensure a 5% growth target is reached for 2023. Monday’s preliminary numbers show the economy grew 5.5% for the first six months.
NAB, an Australian bank cuts its forecast for China’s growth in 2023 to 5.2%, from 5.6% previously. It left its forecasts for 2024 (4.5%) and 2025 (4.8%) unchanged.
The central bank has already lowered borrowing rates several times in a bid to shore up demand in an economy where inflation has largely evaporated in contrast to many other parts of the world.
While the urban jobless rate remained unchanged for June at 5.2%, the proportion of those out of work aged between 16 and 24 rose to a record 21.3% – the sixth consecutive monthly increase.
“Policy measures are likely to be announced after the politburo meeting [later this month], including population and fiscal policies,” said Xing Zhaopeng, a senior ANZ analyst in Shanghai, according to Reuters.
Other official data out on Monday showed the value of newly constructed commercial residential buildings continued to decline in almost all the 70 largest cities in China.
Those in Shenzhen, a major city abutting Hong Kong in the south, were down more than 5% over the January-June period compared with a year earlier.
