China’s gross domestic product (GDP) slowed its growth to a relatively modest 7.9% annualized in the second quarter of the year, after having increased by 18.3% in the period between January and March, according to figures that the National Statistics Office announced this Thursday in Beijing. At a press conference to announce the data, the ONE has warned that growth continues “uneven” and external uncertainties persist.
The moderation of growth from the second quarter and during the rest of 2021 was something already predicted by the experts. In part, because the strong increase in annualized growth in the first quarter reflected the hard hit (-6.8%) that the Chinese economy had suffered in the period from January to March 2020, in the worst of the pandemic. And in part, because in recent months the macroeconomic figures had begun to show a relative loss of momentum. Last week, the People’s Bank of China (PBOC) announced a 0.5% cut in the cash figures that banks must keep as reserves. This measure, which came into force this Thursday and will inject some 130,000 million euros into the economy, is aimed at facilitating loans to small and medium-sized companies.
Compared to the previous quarter, a more realistic comparison, the GDP of the second economy in the world – and the first to recover normality, after giving the pandemic practically over – grew by 1.3%. Three months earlier, the increase had been 0.4%.
Growth in the second quarter was helped by the strength of exports, which increased by 31%, encouraged by the acceleration in vaccination campaigns and the relaxation of restrictive measures against the coronavirus in part of its main trading partners. Imports rose by 43%, despite outbreaks of covid in port areas, including the province of Canton, one of the most populated in the country and a center of manufacturing production. A spokesman for the Customs Service had warned this week that the figures for the rest of the year may be reduced by the uncertainties that still surround the trajectory of the pandemic.
The slow recovery in domestic consumption and the high prices that companies must pay for raw materials weighed against.
According to data from ONE, industrial production grew 8.3% annualized in June, compared to 8.8% a month earlier. Retail sales increased 12.1%, down from 12.4% in May. The urban unemployment rate stood at 5%, after in February 2020, in the worst of the pandemic, it had reached 6.2%. The weakest data comes from investments in fixed assets, with a year-on-year growth of 12.6% in the first semester, compared to 15.4% in the previous semester. Equipment purchases fell 0.8% year-on-year in June, a possible effect of the global shortage of semiconductors.
The Bureau of Statistics considers that the economy has continued its “stable recovery” in the first half of this year, but “many external uncertainties persist and the internal recovery is uneven.” “Efforts are needed to lay the foundations for stable recovery and development,” he says.
A similar assessment is offered by the consulting firm Capital Economics. “The growth headwinds are likely to intensify in the second half of the year,” said its chief economist, Julian Evans-Pritchard, in a note. “The boom in exports during the pandemic appears to have peaked and will ease in the coming quarters as vaccination campaigns and reopening contribute to normalize global consumption trends.”
“As the PBOC has relaunched its efforts to reduce borrowing costs, there is little sign at the moment that it intends to relax quantitative controls on credit and turn around the recent decline in credit growth, which appears to be on track. to weigh down investment spending even more ”, says the analyst.
China has set a growth target of at least 6% for this year, but the International Monetary Fund (IMF) estimates that the world’s second largest economy will register an 8.4% increase in 2021.