China’s economic slowdown deepened in July due to a worsening property slump and continued coronavirus lockdowns, with an unexpected cut in interest rates unlikely to turn things around while those twin drags remain.
Retail sales, industrial output and investment all slowed and missed economists estimates in July. The surveyed jobless rate for those aged 16-24 climbed to 19.9%, a record high and headache for the Communist Party as it gears up for a major congress in coming months that’s expected to give President Xi Jinping a precedent-defying third term in power.
“July’s economic data is very alarming,” said Raymond Yeung, Greater China economist at Australia & New Zealand Banking Group Ltd. “Authorities need to deliver a full-fledged support from property to Covid policy in order to arrest further economic decline.”
The data suggest a crisis of confidence among Chinese businesses and households, adding another threat to the world economy as global demand for everything from Apple iPhones to luxury goods take a knock. At the same time, a worsening property slump is being felt at home and abroad as commodity prices such as iron ore and copper plummet.
China’s bonds surged and the offshore yuan weakened as investors absorbed the disappointing data prints and surprise rate cut. A stock rally cooled across Asia, commodities tumbled and the dollar rose as the gloomy news spread across financial markets.
China’s leadership has ruled out large-scale stimulus and vowed to continue with its stringent Covid Zero policy, requiring authorities to shut down businesses and lock down the population when major outbreaks occur -- as is the case now in the resort island of Hainan. That’s dimming the growth outlook for the rest of the year, which economists are downgrading further below 4%.
Retail sales, industrial output and investment all slowed and missed economists estimates in July. The surveyed jobless rate for those aged 16-24 climbed to 19.9%, a record high and headache for the Communist Party as it gears up for a major congress in coming months that’s expected to give President Xi Jinping a precedent-defying third term in power.
“July’s economic data is very alarming,” said Raymond Yeung, Greater China economist at Australia & New Zealand Banking Group Ltd. “Authorities need to deliver a full-fledged support from property to Covid policy in order to arrest further economic decline.”
The data suggest a crisis of confidence among Chinese businesses and households, adding another threat to the world economy as global demand for everything from Apple iPhones to luxury goods take a knock. At the same time, a worsening property slump is being felt at home and abroad as commodity prices such as iron ore and copper plummet.
China’s bonds surged and the offshore yuan weakened as investors absorbed the disappointing data prints and surprise rate cut. A stock rally cooled across Asia, commodities tumbled and the dollar rose as the gloomy news spread across financial markets.
China’s leadership has ruled out large-scale stimulus and vowed to continue with its stringent Covid Zero policy, requiring authorities to shut down businesses and lock down the population when major outbreaks occur -- as is the case now in the resort island of Hainan. That’s dimming the growth outlook for the rest of the year, which economists are downgrading further below 4%.
