Although questionable, China’s official GDP figure is still under scrutiny given the country’s weight in the global economy.
“Many uncertainties”: China saw its growth run out of steam in the second quarter (+ 7.9% over one year), while domestic consumption is slow to recover from the epidemic and the virus is still threatening the Mondial economy.
In the first quarter, the country’s gross domestic product (GDP) recorded an increase of 18.3% over one year, due to the low basis for comparison with the beginning of 2020, when activity was paralyzed by the epidemic. Now almost free of Covid-19, China was the first country to return to a pre-pandemic level of activity from the end of 2020.
Compared to the first quarter of 2021 – a more realistic basis for comparison – the change in GDP is up 1.3%, after 0.6% over the January-March period. But the recovery is “uneven” and “many external uncertainties” persist, warned the National Bureau of Statistics (BNS).
“Efforts are still needed to consolidate the bases for a stable recovery and development,” said the BNS. This slowdown in growth was widely anticipated. A group of analysts polled by AFP expected a more pronounced deceleration (7.7%).
Not out of the woods
“Exports have been a key driver” thanks to the recovery in the United States, the European Union and the United Kingdom, notes analyst Rajiv Biswas of the IHS Markit firm for AFP. In June, the Asian giant’s foreign sales were up 32.2% over one year.
But “the peak seems to have been reached” and exports are expected to decline, warns analyst Julian Evans-Pritchard of Capital Economics. Foreign demand for electronic products (for teleworking) and pharmaceuticals has boosted Chinese exports in recent months. But it should now be weaker as the global economy picks up and vaccination progresses, he said.
In the second quarter, “the recovery in investment, consumption and services accelerated but [la Chine] is not quite out of the woods yet ”at the health level, said analyst Gene Ma, of the Institute of International Finance (IIF). In particular: the appearance in the spring of an outbreak of Covid-19 which particularly weighed on activity and consumption in Guangdong (south), a very populated province where many factories are located. Soaring commodity prices were also a drag on the recovery.
And in order to soften the shock, Beijing announced last month to put on the market metals drawn from its national reserves. Chinese industrial production nonetheless fell in June (+ 8.3% over one year), against 8.8% a month earlier. As well as retail sales, the main indicator of consumption: + 12.1% over one year, against 12.4% in May.
Pressure on SMEs
These two indicators remain nonetheless “resilient” and are at levels above analysts’ expectations, Rajiv Biswas notes. As for investment in fixed capital, its growth decelerated over the first six months of the year to 12.6%, according to the SNB. The unemployment rate – calculated for urbanites only – was posted in June at 5%, after an all-time high of 6.2% in February 2020, at the height of the epidemic.
While China was the only major economy to experience positive growth in 2020, it must now enter a new phase of recovery. Premier Li Keqiang admitted this week that small and medium-sized enterprises – the main source of employment – are under pressure from rising raw materials. And in this context of slowing down of the recovery, the central bank announced on Friday a cut in the reserve requirement rate for banks.
This measure should enable them to lend more to businesses, on more favorable terms, and ultimately to support employment. According to the central bank, this decision should make it possible to inject 1000 billion yuan (140 billion francs) into the economy in the long term. The International Monetary Fund (IMF) expects this year to increase the GDP of the world’s second-largest economy by 8.4%, after 2.3% in 2020.