China’s Slowing Economic Growth Is Fine For Now

THE LATEST HIGH-FREQUENCY economic data from the National Bureau of Statistics (NBS) confirms the slowing trend of China’s domestic economy revealed in earlier indicators.

  • Industrial output slowed from 8.3% year-on-year (y-o-y) in June to 6.4% in July, the slowest pace in a year, although high-tech manufacturing grew by 15.6% y-o-y. 
  • Retail sales slowed to 8.5% y-o-y, the slowest growth this year, from more than 12% y-o-y in May and June. Sales of durable and nondurable goods slowed, in-store and online. Services also slowed across both channels. 
  • Fixed investment grew by 10.3% y-o-y in the first seven months of 2021, half the 19.9% pace of the first four months of the year.
  • Urban unemployment was little changed at 5.1% from 5.0% in June. 

As to be expected, the NBS asserts that the economy is continuing its stable recovery post-pandemic, but acknowledged the headwinds, including the resurgence of Covid-19, the recent flooding and the ‘growing external uncertainties’, which could cover a multitude of sins from a slowing global economy as the Delta variant causes a renewed surge of infection in developed markets to deteriorating US-Chinese relations.

The economy remains on track to meet its official goals for 2021, including GDP growth of at least 6.0% this year. Anything more may be a stretch. 

Job creation remains critical. The official target is for some 11 million new urban jobs this year, and the surveyed urban unemployment rate to be around 5.5%.

Hitting this goal is more important than the GDP one. Making progress with rebalancing the economy towards being driven more by domestic consumption and less by exports and infrastructure investment while keeping the private sector aligned with Party goals trumps both.

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