Commentary on Political Economy

Wednesday 14 August 2019


BEIJING—China reported a raft of weak economic data, adding to evidence that the world’s second-largest economy is slowing further as it remains locked in a trade war with the U.S.
The jobless rate in Chinese cities returned in July to its highest level since regular reporting on the data began, as employers turned cautious. Other key economic readings for the month, including factory production, consumption and property investment, came in much lower than expected.
While China earlier reported a surprise jump in exports in July, economists say the more-than-yearlong trade conflict with the U.S. has dented market confidence, forcing manufacturers to scale back production and investment, and prompting consumers to tighten purse strings.
“The cooling of economic activity last month was even worse than that of 2008 when industrial production was hit by the global financial crisis, while domestic consumption remained strong,” said Zhaopeng Xing, an economist with ANZ.
Extra stimulus policies will be necessary to keep growth running at 6% to 6.5% in 2019, a target set by Chinese leaders earlier, said Mr. Xing.
Industrial production rose at its slowest pace since the beginning of 2009, increasing 4.8% in July from a year earlier compared with a 6.3% rise in June, the National Bureau of Statistics said Wednesday.
Retail sales—a gauge of consumption—rose 7.6% in the period, down from a 9.8% increase in June, as car dealers finished unloading inventoriesahead of new emissions standards.
“Today’s data demonstrated that the Chinese economy faces increased downward pressure that hasn’t been alleviated by the previous stimulus policies,” said Shuang Ding, an economist with Standard Chartered.
Growth-boosting measures are needed to keep the economy from spiraling out of control, said Mr. Ding. He expects China’s central bank—which reported weak credit data in July—to lower interest rates for the medium-term lending facility, a monetary tool to provide funds for banks.
Beijing’s strategy of stimulating growth by mainly cutting taxes and fees has shown little sign of success so far, with economic growth decelerating to 6.2% in the second quarter, the slowest pace for the country in nearly three decades.
Urban unemployment shot up to 5.3% in July, matching a record high in February, data from the statistics bureau showed. Tackling joblessness is a priority for Chinese leaders who see a robust economy as the foundation to maintain Communist Party rule. Many economists say China’s actual unemployment rate is far higher than official figures suggest.
The nation’s industrial sector has lost five million jobs in the past year,China International Capital Corp. said in a research report in July, attributing 1.8 million to 1.9 million jobs losses to the trade war with the U.S.
The Trump administration on Tuesday postponed until Dec. 15 plans to impose new tariffs on about $156 billion in goods from China.
The decision provides breathing room for some Chinese exporters who could rush shipments of Christmas orders in coming months, said Mr. Xing. He expects China’s exports to remain buoyant in the next few months absent further escalation of trade tensions.

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