Numbers Indicate 'Economic Slowdown'... China Confident in GDP Growth

May Production, Consumption, and Employment Indicators All Weak
"GDP Growth Rate Above 6% Possible This Year"

Last month, economic indicators collectively showed a trend of 'economic slowdown,' but China remains confident in achieving its economic growth target for this year. It is expected that the full effects of policies will appear from the second quarter, with the annual gross domestic product (GDP) growth rate potentially exceeding the target and reaching 6%.

On the 15th, Pu Linghui, spokesperson for the National Bureau of Statistics of China, stated in a press briefing, "China has the conditions, capability, and confidence to overcome difficulties and promote sustained economic recovery," adding, "China's economic soundness is at the highest level from a global perspective." Pu further explained, "Economic growth in the second quarter will show a clear acceleration compared to the first quarter, and as a result, growth in the third and fourth quarters will return to normal levels."

Previously released data on China's production, consumption, and employment indicators for May all fell short of expectations. Industrial production, which reflects manufacturing trends and serves as a leading indicator for employment and income, increased by only 3.5% year-on-year, below the forecast of 3.8%. Retail sales rose by 12.7% year-on-year, also missing the forecast of 13.7%. The unemployment rate remained at 5.2% for the third consecutive month, with youth unemployment (ages 16?24) hitting a record high of 20.8%.

Despite the weak indicators, local media reported a 'moderate recovery.' The Chinese state-run Global Times (GT) cited expert forecasts that China's annual GDP growth rate this year will exceed the target of around 5%, reaching approximately 6%. In the first quarter, China's GDP growth rate was recorded at 4.5%.

Tian Yun, former vice chairman of the Beijing Economic Operation Association, told GT, "The annual GDP will show an N-shaped recovery," adding, "Due to the combined effects of the base effect and the dollar cycle, growth will peak in the second and fourth quarters." Tian emphasized, "Looking at other major advanced economies, the US and European economies are heading toward recession, and Japan's inflation is at its highest in decades. Despite escalating geopolitical tensions and a bleak global economic outlook, China has the tools to support its economy."

The People's Bank of China (PBOC), the central bank, preemptively cut interest rates ahead of the economic data release, which was also seen as part of these 'tools.' On the 15th, the PBOC lowered the Medium-term Lending Facility (MLF) rate, its policy rate, from 2.75% to 2.65%, a 0.1 percentage point cut. This was the first policy rate cut by the PBOC in 10 months. Tian said, "While the US has reached its debt ceiling, China's financial policy is still in the early stages of signaling," forecasting that with the start of government support policies, the second-quarter GDP growth rate will exceed 6%.

Meanwhile, the World Bank (WB) recently projected in its global economic outlook report that China's GDP will grow by 5.6% this year, supported by a rebound in consumption. It particularly expects a sharp increase in investment in infrastructure and manufacturing.