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    Economic Expansion in China Rises By 4.7% During Q2, Falls Short of Predictions

    The GDP of China for the second quarter showed a growth of 4.7% compared to the previous year, which was under the 5.1% growth estimate from a Reuters survey. Retail sales in June also failed to meet projected figures, increasing by only 2% instead of the expected 3.3%.

    Analyst Louise Loo from Oxford Economics pointed out a significant decline in discretionary retail spending post the Shanghai lockdowns in April 2022. The outlook for China’s GDP growth in 2024 has been revised to 4.8%, up from the 4.4% forecasted in December 2023.

    Industrial production saw a positive trend in June, surpassing expectations with a 5.3% year-on-year increase, higher than the anticipated 5%. High-tech manufacturing exhibited a noteworthy 8.8% rise in value added. Urban fixed asset investment for the first half of the year increased by 3.9%, in line with expectations, while infrastructure and manufacturing investments slowed down in June compared to May. Real estate investments continued their steady decline by 10.1%.

    The Bureau stressed the necessity of enhancing market vitality and internal impetus to sustain stable economic growth. The urban unemployment rate maintained a steady 5% in June, with youth unemployment at 14.2% in May.

    During the initial half of the year, average per capita disposable income for urban inhabitants reached 27,561 yuan ($3,801), showing a nominal growth of 4.6% from the previous year. Rural disposable income experienced a faster growth rate at 6.8%, although the amount of 11,272 yuan remained less than half of urban residents’ income.

    Despite falling short of certain economic targets, China’s exports exceeded expectations, recording an 8.6% year-on-year increase in June, while imports decreased by 2.3%, failing to meet predictions. Retail sales for the first six months of the year grew by 3.7%, with online physical goods sales rising by 8.8% and services sector sales increasing by 7.5%.

    On the other hand, sales of cosmetics witnessed a noticeable decline of 14.6% in June, marking the weakest performance. In contrast, catering sales grew by 5.4% in June, contributing to a 7.9% growth for the initial half of the year.

    Consumer prices in China rose by 0.2% year-on-year in June, falling below expectations, while core CPI expanded by 0.6%, slightly lower than the 0.7% rise in the first six months of the year. Credit demand remained subdued, with new yuan loans and broad money supply growth declining significantly in the initial half of the year compared to 2023.

    Goldman Sachs analysts indicated that recent policy communications suggest the People’s Bank of China is emphasizing enhancing monetary policy transmission over overall credit expansion. They expect a gradual deceleration in the growth of new yuan loans and M2.

    Image Source: Gil Corzo / Shutterstock

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