China has reported an economic expansion of 4.3% for the three months ending in June, marking one of the lowest quarterly growth rates since official record-keeping began in the early 1990s. The figure, released Wednesday by the National Bureau of Statistics of China, fell short of the government’s target range of 4.5% to 5%. This performance represents the weakest growth seen since the final quarter of 2022, a period defined by the country’s stringent Covid-19 restrictions.
The data underscores a lopsided economic recovery, with an increasing dependency on foreign sales while domestic investment and consumer demand falter. While customs figures for June showed a 27% surge in outbound shipments, domestic vehicle sales saw a sharp decline of more than 16%. Although retail sales, excluding the automotive sector, rose by 3% last month, analysts argue that more sustained consumption is required for long-term stability.
Li Daokui, a professor of economics at Tsinghua University and an adviser to Beijing’s leadership, highlighted a critical shift in the role of local governments, noting they have moved from being growth engines to potential bottlenecks. Fixed-asset investment, traditionally managed by provincial authorities for infrastructure projects like roads and bridges, fell by more than 4% between January and May. Li described the cumulative negative growth in this sector as unprecedented, noting that similar contractions in investment have occurred only twice since the founding of the People’s Republic of China, specifically in 1961 and 1967. He warned that without addressing these investment declines and unemployment, China’s broader economic objectives would be at risk.
The export-driven nature of the economy, where exports account for approximately 20% of GDP, leaves the nation vulnerable to global pressures. While the US-China trade war remains in a state of detente, Beijing is concerned that a potential resumption of tariffs in November could impact manufacturers. Furthermore, global economic strains, including the US-Israel war on Iran, threaten to reduce international demand for Chinese goods. Despite these challenges, official statistics show growth for the first half of the year reached 4.7%, keeping the economy within the government's target range. Analysts are now looking toward an upcoming gathering of top officials to see if the Chinese Communist party will signal new stimulus measures to rebalance the economy.
Worse-than-expected figures for three months to June come amid concerns over lopsided economy
Economists say more extensive measures are badly needed to increase consumer spending if the economy is to be rebalanced away from exports, which account for about 20% of gross domestic product.
