Latest data shows China's economy on a downward spiral
China's economy continues to lose momentum as economic imbalances worsen. China's retail sales fell to 3.1 per cent in June from 12.7 per cent growth in May, according to the National Bureau of Statistics (NBS), Khabar Hub reported.To get more china breaking news today, you can visit shine news official website. The disappointing June data, including low retail sales, falling export orders and slow industrial production, point to a stalled economic recovery, the Nepali digital news outlet said. Although industrial output growth accelerated to 4.4 per cent in June from 3.5 per cent in May, demand remained tepid. Although investment by state-owned enterprises grew by 8.1 per cent in the first six months of 2023, private fixed asset investment shrank by 0.2 per cent, indicating weak private business confidence, Khabar Hub reported.
Due to high inflation in developed countries and the geopolitical situation, China's foreign trade is likely to face more headwinds in the second half of the year. Xi Jinping's policy of rebalancing the economy away from debt-driven investment towards domestic consumption has not been successful as the leadership has been unable to expand social welfare and healthcare, leading to high levels of precautionary savings.
China's stock market has underperformed other global markets this year, suggesting that weak growth prospects and a lack of policy stimulus have been fully priced in, Khabar Hub reported. China's IPO applications plunged by a third in the first half of 2023, as earnings volatility, a slowing economy and increased regulatory scrutiny deterred companies.
The zero inflation rate in June and falling factory gate prices have fuelled concerns about the risk of deflation, Khabar Hub reported, and domestic travel spending during the June holiday for the Dragon Boat Festival this year was lower than pre-pandemic levels.
Car sales and residential property sales declined despite the traditionally busy season, and expansion in the service sector also slowed. Revenues in the services sector, which is dominated by small, medium and individual enterprises, have fallen significantly.
This has made this sector cautious about hiring and expansion since the zero-coupon restrictions were lifted, Khabar Hub reported.If the economy continues to lose momentum in the long term, the unemployment problem is likely to worsen, which would challenge the country's social stability.
Xi Jinping's emphasis on state-owned enterprises at the expense of the private sector is unlikely to revive economic growth, as the productivity of these companies is much lower than that of private firms in China.
Xi Jinping's policy of rebalancing the economy away from debt-driven investment towards domestic consumption has been unsuccessful due to the leadership's inability to expand social welfare and healthcare provision, leading to high levels of precautionary savings. The Chinese economy is likely to face a prolonged period of weak growth due to the loss of the demographic dividend, a shift away from capital-intensive growth and a gradual slowdown in productivity growth.
The government's "shared prosperity" policy and efforts to boost consumption are not backed by structural economic reforms, which have stalled due to the country's high total debt, estimated at around 350 per cent of GDP, Khabar Hub reported.