China’s economic growth slowed more than expected in the second quarter. Gross domestic product (GDP) rose 4.7 percent year-on-year, up from 5.3 percent growth in the first quarter, China’s National Bureau of Statistics said today. Analysts had expected GDP to rise 5.1 percent, according to Reuters. The economy is being dragged down by the ongoing crisis in the real estate market as well as low consumer confidence.
Compared to the previous quarter, the economy grew by 0.7 percent, while analysts had expected growth of 1.1 percent. In the first quarter, growth compared to the previous three months was 1.5 percent after the data was refined, the preliminary report showed a growth of 1.6 percent.
The Chinese government expects the economy to grow by five percent this year. However, many analysts consider this goal ambitious and warn that the government may have to resort to additional growth incentives to meet it. In the first half of the year, GDP increased by just five percent, the statistical office said.
Analysts see weak domestic demand, lower government spending and persistent problems in the real estate sector as the causes of China’s economic slowdown.
The multi-year crisis in the real estate market deepened in June, when the prices of new apartments and houses fell at the fastest rate in the last nine years. This worsened consumer confidence, and indebted municipalities lost the ability to raise more funds by selling land.
“Stagnant consumer credit growth, consumer confidence in the economy and personal savings rates have yet to show any signs of a real recovery,” Louise Loo of Oxford Economics told the AP, suggesting that the government’s measures to address these issues are too cautious and ineffective. .
“The rest of the year will determine the extent to which government officials manage to contain the fall in the housing market and encourage household spending,” economist Harry Murphy Cruise of Moody’s Analytics told Reuters.
However, Cruise does not expect a more significant turn in economic policy even after the third plenary session of the Central Committee of the Communist Party of China, which is starting now. “Major policy reversals can be seen as an admission of failure and a loss of face. Assuming reforms are only modest, we expect China to just barely reach its full-year growth target of around five percent,” he added.
Source: www.tyden.cz
