CHINA-ECONOMY: CHINA'S NATIONAL BUREAU OF STATISTICS RELEASES LATEST STATISTICS, BUT A CHINA RESEARCH FIRM EXPRESSES DOUBTS

Xinhua (July 15) publicised the statistics released by China's National Bureau of Statistics (NBS) and quoted it as saying China's gross domestic product (GDP) expanded 12.7 per cent year on year in the first half of 2021 as recovery continues to consolidate. In the second quarter, the country's GDP grew 7.9 per cent year on year. It noted the statement of Liu Aihua, a spokesperson with the National Bureau of Statistics, that "The national economy has, in general, sustained a steady recovery in the first half" and that the fundamentals in the first half laid a good foundation for the economic operation in the second. According to the National Bureau of Statistics (NBS) the figure puts average H1 growth for the past two years at 5.3 per cent, 0.3 percentage points faster than the two-year average of Q1 growth from the 2019 level. In the second quarter, the country's GDP grew 7.9 per cent year on year, following an 18.3 per cent Q1 growth, when strong domestic and foreign demand powered recovery from a low base in early 2020 due to the COVID-19 blow. It said other major economic indicators showed continued improvements across the board, with industrial output rising 15.9 per cent and retail sales up 23 per cent year on year in the first half. The country's surveyed urban unemployment rate stood at 5 per cent in June, 0.7 percentage points lower than the same period last year. A total of 6.98 million new urban jobs, or 63.5 per cent of the annual target, were created in the first half. In the six-month period, China's per capita disposable income increased 12.6 per cent year on year in nominal terms, basically keeping pace with the GDP increase. However, the research firm on China, Plenum.ai. described the GDP numbers as uninteresting. It was hardly a surprise that headline yoy growth slowed significantly to 7.9% in Q2 on the base effect and it was equally expected that the two-year annualized growth improved to 5.5% in Q2 from Q1’s 5% since China imposed restrictive covid policies during the Chinese New Year holidays and lifted most of them after March. It assessed further GDP growth cooling is on the cards. If the two-year annualized growth of 5.5% represents the new trend and the output remains unchanged in the next few months, yoy GDP growth could fall to 6% in Q3 and below 5% in Q4. This will add to pressure on Beijing to ease policies because people are not used to GDP growth figures starting with five, let alone four. It was observed that domestic consumption grew slightly faster but still underperformed. Nominal retail sales growth inched up in two-year annualized terms to 4.9% in June from 4.5% in May but remains far from the pre-covid rate of 7-8%. It calculated the real growth rate excluding price factors was just 3.2%. Plenum.ai. said it assessed that a sizable group of the population has structurally changed their behaviour. They have become much more reluctant about travelling or dining out, despite the absence of nearby covid clusters or restrictions on inter-province travel. It is unclear how large the group is, but even if it comprises just 5-10% of the total, it could impact growth trends. The actual share could be much larger as cross-country traffic volume remains only half of the pre-covid levels. If this hypothesis is right, it said, then domestic consumption recovery will remain sluggish, and a return to pre-covid numbers will not be seen any time soon. This means that once cyclical drivers such as real estate and exports lose momentum, the economy will face greater downside risks, and policymakers will be forced to ease policies much further.





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