0912 GMT June 20, 2019
A new batch of data from the National Bureau of Statistics (NBS) showed further deterioration on April’s numbers, and pointed to an ongoing slump across key manufacturing and production sectors, many of which are reliant on strong exports, according to scmp.com.
Industrial production – a measure of the output of the industrial sectors in China’s economy, including manufacturing, mining and utilities – grew by 5.0 percent in May from a year earlier, down from 5.4 percent the month before and below the expectations of a poll of economists, which had predicted 5.5 percent growth.
This was the lowest reading since February 2002, when it was 2.7 percent.
Within industrial production, manufacturing output grew by 5.0 percent year-on-year, down from 5.3 percent in April. The figure measures a period in which the US more than doubled tariffs on $200 billion of Chinese goods from 10 percent to 25 percent and indicates the damage being done by the ongoing trade war.
With no end in sight and with most analysts not hopeful that a substantive trade deal can be reached at the G20 summit in Osaka at the end of June, Beijing must be bracing for a further sputtering in key growth engines.
Furthermore, tariffs on most of the remaining Chinese exports are currently being considered by the US, with public and written testimony being heard by the Office of the United States Trade Representative this month. If the tariff process follows that of previous tariff rounds, this new levy of up to 25 percent, mainly on consumer goods, will take effect in mid-July.
At a press conference in Beijing on Friday, Fu Linghui, spokesman for the NBS, suggested that a month of volatile economic data is ‘normal’ and urged people to observe the economic situation using longer trends. Fu claimed that the Chinese economy is in a strong position to grow more strongly later this year.
“Domestic demand contributed 108 percent of economic growth in 2018, while consumer spending contributed more than 65 percent of economic growth in the first quarter of this year,” Fu told reporters. “Both these showed that the Chinese economy has ample market space and resilience.”
Fixed asset investment, the measurement of expenditure on physical assets like real estate, infrastructure or machinery, grew by 5.6 percent in the January to May period compared to a year earlier, down from 6.1 percent in the January to April period. This was again lower than the Bloomberg poll which had predicted no change last month.
Retail sales, a key indicator of consumer demand in China, grew by 8.6 percent, up from April’s reading of 7.2 percent, which was the lowest rate of growth since May 2003. However, it still lags below the 8.7 percent reading in March. Fu said that the Labor Day holiday on May 1 played an important role in the retail sales growth.
The data helps to build a fuller picture of the current state of the Chinese economy, after a succession of data releases this week, and it does not make for good reading for policymakers in Beijing. The aggregate data has caused some economists to downgrade their growth forecasts for the Chinese economy.
“The economic data coming out of China over the past two months have not lived up to our expectations. We have thus decided to revise our gross domestic product forecast to 6.2 percent for 2019 (-0.2 percentage point) and 6.0 percent for 2020 (-0.1 percentage point),” wrote analysts from ANZ Bank in a note.
On Monday, customs data showed that exports had returned to growth in May after a decline in April – but only just, at 1.1 percent, due to front-loading of orders to beat the US tariff increase. Imports, meanwhile, dropped sharply with the 8.5 percent decline another sign that domestic demand in China remains sluggish.
Consumer inflation rose to a 15-month high, data released on Wednesday showed, as China battles against an African swine fever outbreak which has destroyed huge swathes of its pig population and threatened one of the staple items in the Chinese diet.
There was yet more bad news for the country’s automotive sector, with vehicle sales plummeting 16.4 percent in May, the 11th consecutive monthly decline. With US President Donald Trump still mulling global tariffs on vehicles and their parts, China’s industry could suffer further still, given it is the second largest provider of vehicle parts to the US.
In short, the optimism brought by stronger-than-expected first-quarter growth has worn thin in the second quarter. Beijing has enacted some additional economic stimulus measures – including a new program to boost sales of cars and electronic devices, as well as a loosening of financing conditions for local government infrastructure projects – but is under pressure to do more.