Sluggish economic data out of China is fueling fears that the country’s recovery from its strict Covid-19 lockdown policies is beginning to sputter.
Official figures released in Beijing show that the world’s second-largest economy grew by just 0.8 percent in the second quarter of the year, after growing 2.2 percent in the previous three months.
On an annual basis, production was 6.3 percent higher than a year earlier, well below analyst expectations of an increase of 7.3 percent.
Such growth rates are numbers that the UK and other advanced economies can only dream of.
But its worse-than-expected performance has led to fears that China’s growth over the past three decades – which has contributed to global economic expansion – is coming to an end.
Slowdown: China’s economy grew by just 0.8% in the second quarter of the year, after growing 2.2% in the previous three months
Another longer-term concern is the country’s steadily rising youth unemployment rate, which hit a record high of 21.3 percent in June — up from 20.8 percent in May — as Chinese graduates struggled to find jobs .
There are also concerns that more and more people are taking a break from China’s brutal work culture.
Sheana Yue, China economist at Capital Economics, said the GDP data showed that the post-pandemic recovery is “dying out” and there are currently few signs of activity picking up for the rest of the year.
She said that given the “gloomy” backdrop, policymakers are likely to take further steps to stabilize the economy as measures so far “have failed to meet what is needed to provide meaningful impetus.”
US Treasury Secretary Janet Yellen – a former chair of the Federal Reserve – said China’s slowdown in growth poses a threat to the global economy.
“Many countries depend on strong Chinese growth to drive growth in their own economies, particularly in countries in Asia — and slow growth in China could have some negative spillovers for the United States,” she told Bloomberg Television.
Analysts from research firm Gavekal Dragonomics said if the economy continues at its current pace, China will fall short of its official target of 5 percent full-year growth.
One major area of decline has been in real estate markets – a major pillar of China’s economy as it began building at a breakneck pace to modernize its towns and cities.
Data showed that sales of homes and new construction projects fell to their lowest level in six months, suggesting that both buyers and developers remained cautious after the industry was gripped by a debt crisis during the pandemic.
The main symbol of the debacle was Shenzhen-based Evergrande, China’s second-largest real estate developer.
At the end of 2021, it went bankrupt on a £230bn mountain of debt, sending ripples across the industry and seeing several other developers collapse. That left unfinished homes across the country, sparking protests from mortgage lenders.
China has also been hit by the West’s cost-of-living crisis as consumers in the UK, Europe and North America cut back on buying goods manufactured in its huge industrial core countries.
China’s exports fell 8.3 percent year-on-year last month, while imports fell 2.6 percent, data showed.
Retail sales, meanwhile, rose 3.1 percent in June, but this was below expectations and sharply below May’s 12.7 percent increase.
Declining retail spending among Chinese shoppers is a major concern for many luxury brands, which derive much of their revenue from the country’s large consumer market and growing middle class.
Cartier owner Richemont further dampened industry sentiment with news that sales in the Americas were sharply lower, sending his shares down 10.4 percent, Burberry 1.8 percent and LVMH 3.7 percent. per cent.
Mining companies, which provide huge amounts of raw materials to supply China’s ever-hungry industrial base, also suffered from fears of a slowdown in demand.
Anglo American and copper giant Antofagasta both lost 2.5 percent and Rio Tinto lost 2.4 percent.
“China is a major consumer of commodities and disappointing economic data typically cause shares in miners and oil companies to fall amid 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 Chinese officials should take further action to try to revive sentiment in the economy.
They cited in particular the private sector, which faced a struggle to reduce the record number of unemployed young people aged 16 to 24.
Carlos Casanova, senior Asia economist at Union Bancaire Privee, said record youth unemployment levels “do not bode well for sentiment, stability and overall prosperity.”
A record 11.6 million university graduates are expected to enter China’s workforce this year, but they will face a hyper-competitive job market and a grueling work culture that leave many prone to burnout.
Last year, many on Chinese social media began to extol the virtues of Tang Ping, or “lay flat,” a term used to take a break from the brutal work and push back against China’s infamous 996 culture of work from 9 a.m. to 9 p.m., six days a week.
But the trend of rising unemployment and growing job disillusionment threatens to destabilize the Chinese government’s efforts to catch up with the US.
And President Xi Jinping has previously warned against “lying flat,” as it would jeopardize social mobility.
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