It would seem that the long-awaited recovery after the authorities lifted the health restrictions imposed at the end of 2022 to limit the spread of the Covid-19 epidemic, has started to weaken in the world’s second largest economy in recent weeks, and its effects do not did not appear in certain sectors.
New official figures released Thursday by the National Bureau of Statistics confirm this trajectory.
Last month, one in five young Chinese people were unemployed, meaning the jobless rate hit 20.8%, a new record high in the Asian country.
This rate, which concerns young people between 16 and 24 years old, has continued to increase in recent months and reached 20.4% in April.
However, the unemployment rate for the entire working population did not move in a month and reached 5.2%.
China’s unemployment rate only covers urban areas, so it only reflects a partial picture.
Retail sales, the main indicator of household consumption, fell in May.
The markets follow this indicator closely. Last month, it rose 12.7% year-on-year, but at a slower pace than in April (18.4%).
Analysts polled by Bloomberg Financial News said they expected a more moderate slowdown (13.7%), even though customers have returned to malls and restaurants since health restrictions were lifted in December.
reduce interest rates
Weak domestic demand, despite virtually non-existent inflation, is also holding back the recovery.
Industrial production slowed in May (+3.5% y/y). It had risen 5.6% the previous month as factories gradually returned to full capacity. Analysts expected this decline.
Investment in fixed assets also slowed, recording a 4% year-on-year increase in the first five months of the year (vs. 4.7% previously).
It is an indicator of spending on real estate, infrastructure, equipment and machinery, sectors on which the government was counting to stimulate economic activity.
Authorities are looking to achieve growth of “about 5%” this year, which would be the lowest in decades for the Asian giant. To support growth, the Chinese central bank on Thursday lowered a benchmark interest rate for medium-term loans.
“increasing anxiety”
The decision allows the reduction of financing costs for commercial banks to encourage them to grant more loans on better terms and thus support the economy.
The interest rate on one-year central bank loans to financial institutions was lowered to 2.65% (from 2.75% previously).
Capital Economics analyst Julian Evans-Pritchard said the cut “won’t make much difference” but “reflects growing concern among policymakers about the health of the economic recovery”.
But it will inject 237 billion yuan (around 30.6 billion euros) into the economy, according to the central bank, which on Tuesday lowered the main short-term interest rate in a move that surprised analysts.
The recovery in China is still “fragile” and conditional on “support” from the public authorities, according to estimates by the World Bank on Wednesday, while economists are calling for a recovery plan to revive growth.
“For the economic recovery to be sustainable, a major push from the government is needed,” said economist Zhuyue Zhang of the Pinpoint Assets Management group.
But the authorities seem to rule out this option for the moment.
The economy remains heavily indebted to the real estate sector, the traditional engine of growth, sluggish consumer confidence and a global economic slowdown that is hurting demand for Chinese goods.
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