Trouble brews for China’s economy as challenges mount

China's GDP lower than expected
Source - Money control

On Monday, China announced that its GDP of the second quarter grew by 6.3% in comparison to previous year. The unemployment rate, on the other hand, increased by 21.3% in June among young people between the ages of 16-24. This has set a new record, proving Analysts at Reuters wrong, who had predicted a 7.3% increase in the second quarter GDP.

Fu Linghui, National Bureau of Statistics spokesperson, agreed that China is facing complex environment both geopolitically and economically, however, he added China can still achieve its target set for full-year, i.e., 5% growth for 2023.

China’s economic recovery in June showcased a mixed picture, with retail sales rising 3.1%, slightly below the expected 3.2% growth. The data revealed that catering, sports, entertainment products, alcohol, and tobacco sales experienced the most significant upswing. However, autos, office products, and daily use goods witnessed a decline in sales compared to the previous year.

Online sales of physical goods grew by 6.7% in June compared to the previous year. While still positive, this rate was slower than the growth seen in May, indicating a potential stabilization in the online retail sector.

Industrial production, on the other hand, saw a robust growth of 4.4% from a year ago, surpassing the earlier forecast of 2.7%. This indicates a rebound in manufacturing activities and reflects positive momentum in China’s industrial sector.

Fixed asset investment for the first half of the year recorded a growth rate of 3.8%, beating the predicted 3.5%. Investment in manufacturing continued at a steady pace, but growth in infrastructure investment experienced a slowdown. Notably, investment in real estate further declined in June compared to May, suggesting continued challenges for the struggling property market.

Despite signs of recovery in various sectors, the unemployment rate for urban residents in June remained at 5.2%. Concerns about youth unemployment were raised, with expectations that it might increase further before showing signs of improvement after August.

Looking ahead to the second half of the year, spokesperson Fu expressed expectations of low real estate investment in the near future. He also warned of the possibility of rising youth unemployment before eventual improvement. China lifted its Covid-19 controls in December, but the initial economic rebound has lost momentum. The real estate sector continues to face difficulties in recovery, and falling global demand has impacted exports negatively.

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