China reported on Monday that its gross domestic product (GDP) for the second quarter grew by 6.3% compared to the previous year, falling short of expectations. This figure represents a slower pace of growth from the first quarter, with a 0.8% increase. Analysts had predicted a 7.3% rise in GDP for the second quarter. The National Bureau of Statistics spokesperson, Fu Linghui, acknowledged the challenges posed by the complex geopolitical and economic international environment but expressed optimism that China can still achieve its full-year growth target. Earlier this year, Beijing set a goal of approximately 5% growth for 2023.
Retail Sales and Industrial Production Figures
In June, retail sales rose by 3.1%, slightly below the expected 3.2%. Notably, sales in the catering, sports, and entertainment products sectors, as well as alcohol and tobacco, experienced the most significant increase. On the other hand, sales of automobiles, office products, and daily use goods declined compared to the previous year. Online sales of physical goods in June grew by 6.7% year-on-year, although this growth was slower compared to May.
Industrial production in June saw a 4.4% increase from the previous year, surpassing the forecasted 2.7%. This positive performance indicates a substantial recovery in China’s industrial sector.
Unemployment Rates and Economic Recovery
The unemployment rate among young people aged 16 to 24 reached a record-high of 21.3% in June. In urban areas, the unemployment rate for the same month was 5.2%. China lifted its COVID-19 restrictions in December, leading to an initial economic rebound that has since lost momentum. The real estate sector has struggled to recover, while falling global demand has caused a decline in exports.
Consumer demand within China has remained lackluster, resulting in no change in prices during June. The People’s Bank of China expects a dip in inflation for July but anticipates a later recovery this year. Domestic travel, however, has shown promise in the economic recovery. Urban residents increased their tourism spending during the first half of the year by more than double compared to the previous year, amounting to 1.98 trillion yuan ($280 billion). In contrast, rural residents’ travel spending only rose by approximately 40% during the same period. Despite these positive signs, the overall first-half total of 2.3 trillion yuan in tourism spending is still lower than the 2.78 trillion yuan reported in the first half of 2019, before the onset of the pandemic.
Government Measures and Economic Policy Outlook
To support the struggling real estate sector, the Beijing government announced the extension of property support measures. Additionally, authorities have implemented broad measures to bolster exports. The government has also extended tax breaks for electric car purchases, aiming to support the growth of this emerging industry. However, Beijing has shown reluctance to implement significant stimulus measures, primarily due to the escalating local government debt. A Politburo meeting, expected later this month, may provide further insights into the country’s economic policies moving forward.