Staggering Chinese Economy... Domestic Demand, Exports, Employment, Nothing Is Good (Comprehensive)

The delay in China's economic recovery has become a situation more serious than market concerns. The second-quarter economic growth rate fell far short of expectations, and the youth unemployment rate once again reached an all-time high.

On the 17th, China's National Bureau of Statistics announced that China's gross domestic product (GDP) growth rate for the second quarter of this year was 6.3% year-on-year. The market had expected a growth rate in the 7% range for the second quarter of this year, considering that the GDP growth rate was only 0.4% in the second quarter of last year due to the Shanghai lockdown.

[Image source=Reuters Yonhap News]

Second-quarter report card falls short of expectations... Domestic demand also sluggish
Youth unemployment rate hits another record high

The quarter-on-quarter growth rate recorded 0.8%, down from 2.2% in the first quarter. The market had anticipated around 0.5%. The combined GDP growth rate for the first half of the year, including the first quarter, was 5.5%.

Domestic demand, which China had pinned some hopes on, also showed a sluggish trend. Retail sales in June, announced on the same day, increased by 3.1% year-on-year, slightly below the forecast of 3.2%. The retail sales growth rate in the first quarter was 12.7%. China's retail sales serve as a barometer of domestic economic activity, reflecting changes in various types of consumer spending such as department stores and convenience stores.

Industrial production in June increased by 4.4% year-on-year, surpassing the previous month's figure (3.5%) and the forecast (2.7%). China's industrial production measures the total output of factories, mines, and public facilities, reflecting manufacturing trends and serving as a leading indicator for employment and average income. Fixed asset investment increased by 3.8% year-on-year in June, exceeding the forecast of 3.5%. The fixed asset investment growth rate in the first quarter was 4.0%.

The youth (ages 16?24) unemployment rate, considered a critical risk factor for the Chinese economy, reached 21.3%. This broke the previous record set in May (20.8%) once again. The overall unemployment rate remained at 5.2%, unchanged for four consecutive months since March.

Exports, a key pillar of the Chinese economy, are also faltering. According to the General Administration of Customs, China's exports in June decreased by 12.4% year-on-year in dollar terms. This figure is lower than both the previous month's (-7.5%) and the forecast (0.5%). Monthly exports had been declining from October last year (-0.3%) through February this year (-6.8%), rebounded in March (14.8%) and April (8.5%), but fell again in May (-7.5%).

Imports also declined due to weak demand. China's imports in June were down 6.8%, missing both the previous month's figure (-4.5%) and the forecast (-6.1%). Monthly imports have been negative for eight consecutive months since October last year (-0.7%). As a result, the trade surplus was recorded at $70.6 billion (approximately 90 trillion 150 billion KRW). Although this is an improvement from the previous month's $65.8 billion, it fell short of the forecast of $93.9 billion.

[Image source=Reuters Yonhap News]

Despite interest rate cuts, Chinese consumers are not spending
Experts say "Top leadership must step up to restore confidence"

China is responding to the economic recovery mainly through monetary policies such as interest rate cuts. On the 14th, Liu Guochang, Deputy Governor of the People's Bank of China, said, "Considering the broad money supply (M2) flow and the economic growth trend, deflation is not occurring," but added, "Appropriate policy measures will be taken according to economic needs and price conditions." Earlier last month, the policy interest rate was adjusted, including a cut to the loan prime rate (LPR), the effective benchmark rate, for the first time in 10 months.

However, support measures related to real estate, which are holding back the Chinese economy, have yet to appear. On the 10th, the People's Bank of China and the National Financial Regulatory Administration announced indirect measures to extend the maturity of unpaid debts of real estate developers, but the market consensus is that this is insufficient to lead the sluggish market.

Some argue that, more fundamentally, China's top leadership needs to demonstrate a strong commitment to economic stimulus. Qing Changhua, China strategist at Aletheia Capital, stated in a column for the economic media Caixin, "The most effective stimulus is to gain trust from consumers and businesses."

He explained, "Over the past decade, the Chinese government has downplayed the importance of economic growth as a major policy goal, shifting focus to common prosperity, real estate deleveraging, financial regulation, and geopolitical competition," adding, "If the government can clearly reaffirm that economic development remains the most important goal, it could greatly enhance credibility." He further emphasized the need to strengthen support for private enterprises, saying, "It is important for the top leadership to strongly express support for private entrepreneurs and actively gather stakeholders' (businesses') opinions before introducing policies." Additionally, he noted, "Restoring communication mechanisms could be a practical path to rebuilding business trust."

This content was produced with the assistance of AI translation services.