Some Analysts Attribute Growth to "Front-Loading of Export Volumes"
Despite being engaged in a trade war with the United States, China achieved a 5.2% growth rate in the second quarter of this year, delivering better-than-expected results. This means China has reached its target of "around 5%" for two consecutive quarters, a goal set at a similar level to last year. However, the Chinese government also noted that external uncertainties persist and diagnosed that domestic demand remains insufficient.
GDP up 5.3% in the First Half... 5.2% in the Second Quarter
On July 15, the National Bureau of Statistics of China announced that the country's gross domestic product (GDP) for the first half of this year was 66.0536 trillion yuan (approximately 12,733 trillion won), representing a 5.3% increase from the same period last year at constant prices.
Quarterly year-on-year growth rates were 5.4% in the first quarter and 5.2% in the second quarter, respectively. The second quarter growth rate (5.2%) slightly exceeded the expert forecasts compiled by Reuters and Bloomberg, which both predicted 5.1%. China also achieved its annual growth target of "around 5%."
Due to proactive government policies to stimulate consumption, such as subsidies that have continued since last year, retail sales in the first half increased by 5.0% compared to the same period last year. This growth rate is higher than the 4.6% seen in the first quarter.
Industrial production in the first half rose by 6.4% year-on-year. The National Bureau of Statistics explained that increased production of 3D printers (43.1%), new energy vehicles (36.2%), and industrial robots (35.6%) drove the overall upward trend.
Fixed asset investment, which reflects changes in capital investment in factories, roads, power grids, and real estate excluding rural areas, increased by 2.8% in the first half. The growth rate in the first quarter was 4.2%, indicating a slowdown in the second quarter. In particular, investment in real estate development, which remains in a slump, fell by 11.2% in the first half, with the decline in the second quarter being greater than the 9.9% drop in the first quarter.
The consumer price index (CPI) for the first half fell by 0.1% compared to the same period last year, continuing concerns about deflation (a decline in prices amid economic stagnation). As of June, the CPI rose by 0.1% year-on-year. The unemployment rate in the first half was 5.2%, slightly down from the 5.3% recorded in the first quarter.
China: "Many External Uncertainties, Insufficient Domestic Demand"
The National Bureau of Statistics of China stated, "There are relatively many external unstable and uncertain factors, and domestic effective demand is insufficient. The foundation for economic recovery still needs to be further solidified." The bureau added, "By comprehensively managing domestic economic affairs and international economic and trade struggles, we must steadfastly do our own work well and respond to external uncertainties with the certainty of high-quality development."
Even as China openly cites domestic demand contraction and U.S.-driven trade issues as "challenges," some analysts point out that the achievement of target growth rates in both the first and second quarters does not mean that risk factors have disappeared. The United States and China, which reached partial agreements in two rounds of talks in Geneva, Switzerland, and London, United Kingdom, must reach a permanent agreement by August 12.
Zhang Zhiwei, chief economist at Pinpoint Asset Management, told Reuters, "China's achievement of a second-quarter growth rate exceeding the official 5% target was partly due to front-loading of export volumes before tariff hikes." He added, "Exceeding the target growth rate in both the first and second quarters gives the government some leeway to withstand a slowdown in the second half."
Julian Evans-Pritchard, an economist at Capital Economics, noted that China's GDP figures "may still overstate the underlying momentum," and pointed out that "as exports decline and the effects of fiscal support fade, growth is likely to slow further in the second half of the year."
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