1/7
China's GDP growth in the second quarter was a disappointing 6.3% year on year. Because of the terrible performance over the same period last year, different consensus estimates ranged anywhere between 6.7% and 7.3%.
caixinglobal.com
China's GDP growth in the second quarter was a disappointing 6.3% year on year. Because of the terrible performance over the same period last year, different consensus estimates ranged anywhere between 6.7% and 7.3%.
caixinglobal.com
2/7
Given distorted base effects, it may be more useful to consider quarter-on-quarter GDP growth. On that basis second quarter GDP grew by 0.8%, half the average rate of the five years before COVID (it was 2.2% in Q1).
Given distorted base effects, it may be more useful to consider quarter-on-quarter GDP growth. On that basis second quarter GDP grew by 0.8%, half the average rate of the five years before COVID (it was 2.2% in Q1).
3/7
This represents an annualized growth rate 3.2%, although you have to be careful about annualizing quarterly growth rates. Still, it suggests that we're going to need a decent pick up in growth over the rest of 2023 if China is going to meet or exceed the 5% GDP growth target.
This represents an annualized growth rate 3.2%, although you have to be careful about annualizing quarterly growth rates. Still, it suggests that we're going to need a decent pick up in growth over the rest of 2023 if China is going to meet or exceed the 5% GDP growth target.
4/7
The composition of growth was as disappointing as the growth itself. Industrial output in June was up 4.4% year on year, or up 0.68% month on month. Retail sales, a proxy for consumption, were up 3.1% year on year, or up 0.23% month on month.
The composition of growth was as disappointing as the growth itself. Industrial output in June was up 4.4% year on year, or up 0.68% month on month. Retail sales, a proxy for consumption, were up 3.1% year on year, or up 0.23% month on month.
5/7
That means that while consumption growth seemed to be outpacing production growth in the first quarter of 2023, it has once again fallen behind in the second quarter. This is clearly not the way to rebalance demand towards a greater role for consumption.
That means that while consumption growth seemed to be outpacing production growth in the first quarter of 2023, it has once again fallen behind in the second quarter. This is clearly not the way to rebalance demand towards a greater role for consumption.
6/7
Investment numbers were also disappointing. FAI was up 3.8% year on year in the first half of 2023, with private investment down 0.2%. Entities that operate under hard budget constraints are still contracting relative to entities that operate under soft budget constraints.
Investment numbers were also disappointing. FAI was up 3.8% year on year in the first half of 2023, with private investment down 0.2%. Entities that operate under hard budget constraints are still contracting relative to entities that operate under soft budget constraints.
7/7
While most analysts are focusing on the weak GDP growth performance, I would argue that what matters more is that the quality of GDP growth seems to be further deteriorating. China needs better growth far more than it needs more growth.
While most analysts are focusing on the weak GDP growth performance, I would argue that what matters more is that the quality of GDP growth seems to be further deteriorating. China needs better growth far more than it needs more growth.
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