ALBAWABA – Weakening domestic demand and shrinking exports are anchoring the growth of sluggish China economy, according to official trade data released Thursday.
Imports and exports have plunged to near-record levels in June, on both month-on-month and year-on-year basis, the Chinese General Administration of Customs report confirmed.
Meanwhile the government seems hesitant to roll out wide-scale stimuli and has so far sufficed with two rate cuts and a singular real estate credit support program.
The People’s Bank of China cut the rate on its one-year loans on Thursday, Reuters reported, after lowering short-term rates earlier this week. Official data also showed a significant slump in real estate, a worrying decline in business investment and record joblessness among young people.
Still, any further stimulus is likely to be limited in scope. Especially with Beijing is still on track to meet its relatively conservative growth target of around 5 percent in 2023, despite rounds of United States restrictions on trade and technology.
Nonetheless, the Reuters report sheds light on high debt levels in the economy and worries about financial stability. This could discourage officials from overstimulating the property sector.
“Stimulus is likely to be measured,” Ding Shuang, chief economist for Greater China and North Asia at Standard Chartered Plc., told Reuters.
“We see the PBOC’s policy rate cut this week as a clear signal of policy easing, intended to prevent the negative sentiment from fanning itself,” he said.
Measures to boost consumption — in the car, home appliance and catering industries — are in the works, a commerce ministry spokesperson said Thursday at a regular briefing.
The State Council is expected to address a broad package of stimuli for various sectors including real estate, Bloomberg News reported earlier this week.
The PBOC could cut interest rates further this year and give banks a cash boost so they can keep lending, according to Reuters.
However, expectations of further stimuli have bolstered market indexes.
The CSI 300 Index closed 1.6 percent higher on Thursday, the most since February, while the yuan was the best-performing emerging-market currency in Asia.
On the labor market front, unemployment remained relatively elevated at 5.2 percent in May. While the jobless rate for young people aged 16 to 24 rose slightly to 20.8 percent, a new record high since data became available in 2018, according to Reuters.
In the meantime, infrastructure investment remains one of the few bright spots in the Chinese economic landscape, having accelerated to an 8.8 percent gain in May from a year ago, according to estimates carried by Reuters.
Reuters’ Key highlights on China economy
PBOC cut the rate on its one-year loans by 10 basis points to 2.65 percent
Growth in industrial output slowed to 3.5 percent
Retail sales grew 12.7 percent, below expectations
Fixed asset investment in the first five months of 2023 rose 4 percent y-o-y
Investment by private businesses contracted 0.1 percent
Property investment declined 7.2 percent
