China’s latest GDP figures fall short of forecast

According to government figures released this week, China’s economy expanded 6.3% year-on-year in Q2, falling short of the consensus forecast of 7.3%, writes Tom Simpson

While growth of 6.3% may appear strong, Q2 of 2022 saw China’s economy expand by 0.4% as the country experienced severe disruption from its zero Covid policy – so Q2 of 2023 was always expected to be a higher-than-average number.

Seasonally adjusted quarter-on-quarter growth saw an expansion of 0.8%. And in nominal terms, Q2 growth was lower than Q1 at 4.8% compared to 5%, respectively.

Meanwhile, consumption, a key growth driver as China seeks to shift its economy away from supply, remains sluggish. Retail sales grew by 3.1% year-on-year in June. Again, this growth is warped by the same month in 2022, when the economy was experiencing major impacts from severe lockdowns from March through June.

The charts above and below (all taken from Caixin) reflect two further key fronts for China’s economy in 2023: real estate and youth unemployment.

Investment in property development continues to fall (-7.9%), while state-led infrastructure investment expanded by 7.2%. Residential property sales are also struggling, with pre-owned unit prices falling by 0.7% in June month-on-month, according to China’s National Bureau of Statistics. New home sales by China’s 100 biggest real estate developers fell by 28.1% to $72.5 billion (£55.3 billion) in June despite 2022 being a slow year due to zero-Covid.

Youth unemployment has now climbed to 21.4% in June, with the China Academy of Social Sciences predicting this number will peak at 23% in July as another fresh wave of graduates hits the job market.

The perennial question of ‘when stimulus’ may finally be answered in the coming weeks. And if and when that stimulus does arrive, expect to see measures introduced to support households and the private sector – both of which have borne the brunt of the economic impact of recent years.

Call +44 (0)20 7802 2000 or email enquiries@cbbc.org now to find out how CBBC’s market research and analysis services can provide you with the information you need to succeed in China.