China’s economic growth slows in the second quarter

BEIJING – China’s economic rebound slowed in the second quarter, but continued to show unusual resilience more than a year after the country largely took control of the coronavirus within its borders.

Chinese factories delivered another higher-than-expected quarter of production as its consumers beat expectations on the downside, giving hope that domestic spending could play a bigger role in sustaining momentum in the months to come.

In total, the Chinese government said on Thursday that gross domestic product rose 7.9% in the second quarter from a year earlier, in line with economists’ expectations.

While this growth rate was much slower than the 18.3% yoy jump in GDP in the first three months of 2021, no one expected the Chinese economy to maintain this growth rate then. as the statistical distortions of last year’s pandemic crisis were fading.

The second-quarter growth figure helped propel the Chinese economy to a 12.7% expansion for the first half of the year compared to the first six months of 2020 marked by the pandemic.

Below the overall GDP figure, stronger-than-expected readings on industrial production, retail sales and capital investment data in June are expected to calm growing speculation that Beijing will intervene more forcefully to maintain its momentum. growth in the second half of the year.

Last week, in a move that surprised many in the market, Beijing decided to free up more liquidity in the banking sector for loans, hinting at high-level concerns about slowing economic activity.

But further stimulus may not be necessary. With the 12.7% growth figure in the first half of the year, policymakers now appear to have plenty of room to meet their annual growth target of at least 6%, even if the economy slows significantly in the second half.

Beijing has been cautious in managing economic expectations this year, given the myriad of uncertainties surrounding the coronavirus pandemic and the global recovery.

A man works at a construction site in Shanghai earlier this year.


Photo:

Alex Plavevski / Shutterstock

The growth target of 6% or more, set by Chinese Premier Li Keqiang in March, has been widely viewed by economists as conservative. Many forecasters expect China to easily post growth of 8% or more this year, given the low basis for comparison to 2020.

Beijing has also indicated that it would be comfortable with more modest growth this year as it resumes its longer-term efforts – interrupted by the pandemic – to deal with deeper imbalances in the economy, including the ‘rising debt levels, soaring housing prices and an aging population.

Now, the unexpected resilience of the second quarter could allow Beijing to maintain relatively rapid growth while tackling these issues in the longer term.

Economic strength can be seen across the spectrum. Industrial production rose 8.9% in the second quarter and 8.3% in June from a year earlier, according to data released Thursday by the National Bureau of Statistics, exceeding expectations.

Retail sales, a key measure of consumer spending in China, rose 13.9% in the second quarter and 12.1% in June from a year earlier, also beating expectations.

Capital investment increased 12.6% in the first six months of the year, again exceeding expectations.

China’s urban unemployment rate, its main measure of unemployment, remained stable at 5.0% in June, the same as in May, the statistics bureau said.

Thursday’s numbers came after data released earlier in the week showing exports, a hobbyhorse of the recovery that has so far delivered month after month of outperformance, leading to another better-than-expected result in June.

The firm’s figures underline the attractiveness of the Chinese market for American companies, despite the rise in geopolitical tensions.

Levi Strauss & Co., the US bluejean maker, reported a better-than-expected quarter for the quarter ended May 30, in part due to increased sales in China that exceeded pre-coronavirus levels.

Charles Bergh, president and CEO of Levi Strauss, said this month that quarterly sales in China were up 3% from the same period in 2019 as the company moved more of its sales to online channels in what he called “one of our biggest growth opportunities.”

People pass an electric vehicle at a Beijing mall earlier this year.


Photo:

tingshu wang / Reuters

Northern Technologies International Co.

, a maker of biodegradable plastics and corrosion inhibitor products, said its Chinese subsidiary’s net sales jumped 30.7% from the previous quarter to an all-time high in its most recent period, which ended May 30.

“We anticipate that China will likely become our largest geographic market in the coming year,” Managing Director Patrick Lynch said earlier this month.

The Circle Pines, Minnesota-based company is investing $ 6.2 million this month to acquire a new facility in Shanghai to support its operations in China.

Not everyone benefits as much. Sherry Cai, sales manager at Guangzhou C&Y Filter Co., a small filter maker with two production lines in southern China’s Guangdong province, says soaring raw material prices this year have gutted its profits, although customer demand remains stable.

“Rising raw material prices is the biggest problem we face this year,” said Ms. Cai, who said prices for filter paper imported from South Korea jumped nearly 30% in the first half of the year. .

In addition to rising raw material prices, the company has also faced a shortage of shipping containers and a stronger yuan, which makes its products less competitive in the global market.

“The profit margin on our products is only 10%. If the cost has increased by 30%, then we cannot pass the entire increase on to our customers, ”Ms. Cai. “We have to eat the prize.”

Write to Jonathan Cheng at [email protected]

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