Sluggish economic data from China is fuelling fears that the country’s rebound from its strict Covid-19 lockdown policies is starting to splutter.
Official figures published in Beijing showed that the world’s second largest economy expanded by just 0.8 per cent in the second quarter of the year, having grown by 2.2 per cent over the previous three months.
On an annual basis, output was 6.3 per cent higher than a year earlier, well below analyst expectations of a 7.3 per cent rise.
Such growth rates are figures that the UK and other advanced economies can only dream of.
But the worse-than-expected performance has sparked fears that China’s boom over the last three decades – which has helped to fuel global economic expansion – is running out of steam.
Another longer-term concern is the country’s steadily rising youth unemployment rate, which hit a record high of 21.3 per cent in June – up from 20.8 per cent in May – as Chinese graduates struggled to find jobs.
There are also concerns that increasing numbers are taking a break from China’s relentless work culture.
Sheana Yue, China economist at Capital Economics, said the GDP data showed that the post-pandemic recovery was ‘fizzling out’ and there were currently few signs of activity picking up across the rest of the year.
She said given the ‘bleak’ backdrop, policymakers were likely to make further moves to stabilise the economy, with measures so far having ‘fallen short of what is needed to provide a meaningful boost’.
US Treasury Secretary Janet Yellen – a former chairman of the Federal Reserve – said the slowdown in China posed a threat to the global economy.
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‘Many countries do depend on strong Chinese growth to promote growth in their own economies, particularly countries in Asia — and slow growth in China can have some negative spillovers for the United States,’ she told Bloomberg Television.
Analysts at research house Gavekal Dragonomics said if the economy continued at the current pace, China would miss its official target of 5pc growth for the full year.
A key area of decline was in the property markets – a major pillar of the Chinese economy as it embarked on a breakneck pace of construction to modernise its towns and cities.
Data showed that sales of homes and new housing projects slumped to their lowest levels in six months, suggesting that both buyers and developers remained cautious after the industry found itself gripped by a debt crisis during the pandemic.
The major symbol of the debacle was Shenzhen-based Evergrande, China’s second-largest property developer.
Late in 2021, it defaulted on a £230billion debt pile which sent ripples across the sector and saw several other developers collapse. That left unfinished homes across the country, sparking protests from mortgage borrowers.
China has also been hit by the cost of living crisis in the West as consumers in the UK, Europe and North America cut back on buying goods manufactured in its massive industrial heartlands.
China’s exports last month were down 8.3 per cent on a year earlier while imports dipped by 2.6 per cent, data showed.
Retail sales, meanwhile, were up 3.1 per cent in June but this was below expectations and sharply below the 12.7 per cent jump seen in May.
Slowing retail spending among Chinese shoppers is a big concern for many luxury brands which rake in a large portion of their sales from the country’s big consumer market and growing middle class.
Cartier owner Richemont dampened the mood in the sector further with news that sales in the Americas were sharply lower, sending its shares down 10.4 per cent, Burberry fell 1.8 per cent and LVMH dropped 3.7- per cent.
Mining firms, which supply vast amounts of raw materials to supply China’s ever-hungry industrial base, also suffered amid fears of a demand slowdown.
Anglo American and copper giant Antofagasta both lost 2.5 per cent and Rio Tinto shed 2.4 per cent.
‘China is a major consumer of commodities and disappointing economic indicators typically drive down shares in miners and oil companies over fears that demand for metals, minerals and energy products will be lower than previously hoped,’ said AJ Bell’s Danni Hewson.
Some economists warned that China’s officials would need to pursue further action to try to revive sentiment in the economy.
They particularly cited its private sector, which faced a battle to bring down the record high numbers of young people, aged between 16 and 24, out of work.
Carlos Casanova, senior Asia economist at Union Bancaire Privee, said the record unemployment level for the young ‘doesn’t bode well for sentiment, for stability, for common prosperity’.
A record 11.6m university graduates are expected to enter China’s workforce this year but will face a hyper-competitive jobs market and a gruelling work culture which leaves many prone to burnout.
Last year, many on Chinese social media began to extol the virtues of Tang Ping, or ‘lying flat’, a term used for taking a break from relentless work and pushing back against China’s notorious 996 culture of working 9am-to-9pm, six days a week.
But the trend of rising unemployment and growing disillusionment with work threatens to destabilise the Chinese government’s efforts to catch up with the US economically.
And President Xi Jinping has previously warned against ‘lying flat’, saying it would jeopardise social mobility.
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