As the first half of the year comes to a close, experts are anticipating the release of China Q2 GDP data. With a low base effect from the same period last year, many analysts interviewed by the Securities Daily expect the GDP growth rate to exceed 7% YoY. However, concerns about insufficient demand and weak internal dynamics have emerged as significant obstacles to sustained economic recovery.
The Consumption Conundrum And Weak Property Sector
High-frequency data reveals that consumption recovery has been slowed. In May, retail sales increased by 12.7% YoY, down from 18.4% YoY in April. Securities Daily reported Dongfang Jincheng Chief Macro Analyst, Wang Qing, points out that the weak momentum in consumption is persisting due to incomplete recovery of residents’ consumption. The article added Pang Ming, Chief Economist and Head of Research at JLL highlights the gradual emergence of insufficient demand and weak endogenous power as the primary hindrances to economic recovery since the second quarter. Lastly, Zhang Wenlang, chief macro analyst of the CICC Research Department underlines that insufficient demand remains a prevalent issue, and real estate investment continues to weigh down overall fixed asset investment.
Wang Qing expects the year-on-year GDP growth rate for the second quarter to reach around 7.5% YoY, contributing to an estimated first-half growth rate of 6.0% YoY. Meanwhile, Zhang Wenlang predicts a second-quarter GDP growth rate of 7.0% YoY.
Policy Initiatives to Boost Growth
To tackle the economic challenges, policymakers have been implementing measures on both monetary and fiscal fronts. The central bank has recently reduced the 7-day reverse repurchase operation, MLF operation and loan prime interest rates, aiming to stimulate economic activity. The Ministry of Finance has issued the remaining local government debt quotas for the year to all regions, while the Ministry of Commerce is actively promoting consumption, particularly in the automobile and green smart home appliance sectors. In this context, according to a commentary in the Economic Daily on Tuesday, it is important to display increased patience and confidence in China’s economic recovery. Despite experiencing short-term fluctuations, the long-term prospects remain favorable, and this should be acknowledged.