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How bad is China’s economy?

W.Hen Janet Yellen During her visit to Beijing this month, she did her best for the local restaurant industry. The U.S. Treasury Secretary dined with his team at a restaurant known for Yunnan cuisine, after which the restaurant unveiled her “god of wealth” menu in her honor. She also hosted a luncheon with female entrepreneurs and economists (including female representatives). economist). Restaurants have been thriving since China lifted its coronavirus lockdown late last year, but the god of wealth has been less kind to the rest of the country’s economy. GDP The figures announced on July 17 have been revealed.

They showed that the economy in the second quarter grew 6.3% year-on-year. That’s impressive. However, it was later than expected. And with Shanghai and other cities on lockdown last year, the numbers have been flattered with a lower base for 2022. Compared to the first three months of the year, the economy grew just 0.8% in the second quarter, or just 3.2% on an annualized basis (see Figure 1).

Obstacles to growth were both international and domestic. For example, the dollar value of Chinese exports fell more than 12% year-on-year in June, the biggest drop since the height of the pandemic in February 2020. “The global economic recovery is slow,” he said. Fu Linghui of the National Bureau of Statistics said in an explanation. Meanwhile, the vegetable garden has lost the recovery of China’s real estate market. June apartment sales fell 27% from a year earlier. Given China’s urbanization and widespread demand for better accommodation, they are now well below the pace economists believe is justified by underlying demand.

China’s “nominal” growth rate before adjusting for inflation was also lower than the inflation-adjusted figure. It’s something he’s only done four times in the last 40 quarters. This suggests that the prices of Chinese goods and services are falling. In fact, that means a 1.4% decline in the year to Q2, which would be the steepest decline since the global financial crisis (see Figure 2).

Consumer prices did not rise at all in June compared to the same month last year, and producer prices charged at the factory entrance fell 5.4%. Chinese statisticians attribute the slowdown to changes in global commodity prices, such as lower oil prices. That is an unconvincing explanation for China’s nominal growth weakness. GDP Only the value added to China’s own goods must be counted, excluding the value of imported goods. Deflationary pressure may be spreading. Or maybe Chinese statisticians got the numbers wrong.

Some people feel that the economy is even worse than official statistics suggest. As one commentator puts it, there is a “temperature gap” between macroeconomic data and “micro sentiment.” In response, Mr. Hu of the National Bureau of Statistics pointed out that macroeconomic data is more comprehensive and reliable than “micro-feelings,” and told netizens, “If the National Bureau of Statistics says it’s okay, we’ll follow suit.” You should adjust your emotions,” he joked.

The government’s own thoughts on the economy are difficult to read. After global trade fell off a cliff during the global financial crisis, Chinese authorities launched a massive stimulus package that boosted economic growth and spilled over to the rest of the world. Today they don’t seem to be in much of a hurry. The country’s central bank lowered interest rates a little. Tax relief measures for the purchase of electric vehicles have been extended. But those expecting China’s cabinet, the State Council, to announce detailed fiscal stimulus after its meeting on Friday, were disappointed.

This lack of urgency may reflect the government’s continued confidence in the economic recovery. Officials may believe the economy still has enough momentum to meet this year’s targets. GDP About 5% growth. Government restraint could betray government concerns about additional stimulus. Policy makers don’t want lending and increased spending undermining the profitability of state-owned banks or undermining the fiscal discipline of local governments.

China’s economic reopening has so far been led by services, which tend to be labor-intensive, such as restaurants. Chinese cities added 6.8 million jobs in the first half of this year, more than half of the government’s annual target of 12 million. The urban youth unemployment rate rose to 21.3%, while the overall unemployment rate remained steady at 5.2% in June, below the target of 5.5%.

But the labor market could be an indicator of slowing economic momentum. If growth remains weak, the unemployment rate will eventually rise. Such a scenario could force governments to do more to revive the economy. Authorities can tolerate a gap between data and people’s feelings. They will be reluctant to accept that there is a clear gap between the economy and their goals.

https://www.economist.com/finance-and-economics/2023/07/17/how-much-trouble-is-chinas-economy-in How bad is China’s economy?

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