China Expected to Achieve 5% Growth Rate... Continued Stimulus Needed for Economic Recovery

August Consumption and Production Recovered More Than Expected
But Investment Growth Rate Slowed and Export Decline Continued

With the improvement of major economic indicators in China in August, the possibility of achieving the Chinese government's economic growth target of 5% has increased, but there is an analysis that government-level stimulus measures need to continue for economic recovery.

On the 15th, the National Bureau of Statistics of China announced that retail sales in August increased by 4.6% year-on-year, and industrial production rose by 4.5%. The increase in retail sales exceeded Reuters' forecast of 3%, and the industrial production growth rate also surpassed the analyst estimate of 3.9% compiled by Reuters.

The International Finance Center stated in a recent report following the release of China's economic indicators, "The rapid recovery of sluggish consumption and production and the easing of deflation concerns are positive," adding, "With key indicators improving more than expected and the expansion of the Chinese government's stimulus measures, growth around the target of 5% this year is expected to be achievable."

However, attention is needed as the investment growth rate is slowing and the export decline continues. Despite an increase in government-led infrastructure investment (+6.4%), the year-to-date growth rate of fixed asset investment slowed from 3.4% in July to 3.2% in August due to weak real estate investment (-8.8%). The year-on-year export growth rate somewhat recovered from -14.5% to -8.8% due to expanded automobile exports, but it has been negative for four consecutive months. Imports also continued to decline, from -12.4% to -7.3%.

The International Finance Center pointed out that the sluggish real estate market and weak external demand could weaken economic resilience. The center noted, "Instability among real estate developers such as Biguiyuan and Yuanyang continues, and housing transaction volumes remain sluggish," and "exports have recorded negative growth for four consecutive months, and recently the European Union announced an investigation into subsidies for Chinese electric vehicles, raising concerns about ongoing uncertainties."

It added, "Recent measures such as easing real estate regulations, stock market support, and financial assistance will contribute to boosting domestic demand to some extent, but stimulus measures need to continue for economic recovery."

The International Finance Center also stated, "The widening interest rate gap between the U.S. and China acts as a burden, so additional interest rate cuts are expected to be modest (about 10 basis points), and the fiscal support burden due to local government debt issues is also increasing," adding, "Major investment banks (IBs) also point out that government-led liquidity supply may be delayed in the future, and specific industry-level support measures need to be expanded to restore corporate investment sentiment."

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