By Jonathan Cheng
BEIJING--China continued to build on its post-coronavirus
recovery in July, though momentum cooled slightly as challenges at
home and abroad piled up and Beijing eased off stimulus
China's factories continued to lead the recovery last month,
though the 4.8% expansion in industrial production from a year
earlier, matching June's increase, undershot economists' expected
5.0% increase, according to data released Friday by the National
Bureau of Statistics.
Perhaps more worrying, China's retail sales, a closely watched
gauge of consumption, remained in negative territory in July,
defying expectations for a second straight month of a return to
pre-coronavirus levels following the resumption of business at
restaurants and retail stores across the country, which began in
For July, retail sales fell 1.1% from a year earlier, a narrower
decline than June's 1.8% year-over-year drop but missing
economists' projection for retail sales to finally match last
year's levels. With July's disappointment, retail sales have
recorded negative growth every month this year.
Taken together, Friday's data release suggested to some
economists that China's rebound may have already seen its best days
after the second quarter's better-than-expected 3.2% expansion in
gross domestic product.
"It's just one month, but it's consistent with the idea that the
snapback we got in the second quarter is not going to be repeated,"
said Michael Spencer, head of Asia-Pacific research for Deutsche
Bank in Hong Kong.
The investment bank had forecast Chinese retail sales to grow by
1% in July, but Mr. Spencer noted that while retail sales for goods
have bounced back fully, lingering public-health concerns continue
to hold back restaurants and other services.
"We have to recognize that when you don't allow cinemas to open,
and tell people you should avoid restaurants, you should expect
that those parts are going to necessarily lag," Mr. Spencer said.
"Demand couldn't recover because people were told to be
After posting a sharp contraction in gross domestic product for
the first three months of the year because of stringent lockdown
measures, China emerged as the only major global economy to post
year-over-year growth in the second quarter.
Friday's data, though slightly missing projections, shows that
the recovery in the world's second-largest economy remains on
track, said Ding Shuang, an economist at Standard Chartered. Even
so, Mr. Ding warned: "It's hard for the growth rate to accelerate
Though he has projected Chinese economic growth to rebound to
roughly 6% in the second half of the year, Mr. Ding says Beijing
still has to address some structural issues to make the recovery
China's urban unemployment rate, its main official gauge of
joblessness, hovered unchanged at 5.7% in July, with hiring
conditions for young workers worsening further, the statistics
bureau said Friday, without offering a more specific breakdown of
the data. In June, the jobless rate for college graduates jumped to
The higher jobless rate, coupled with stagnating income for many
Chinese citizens, threatens to exert more pressure on the consumer
sector, whose recovery has lagged behind that of other economic
drivers this year.
Even so, there were some bright spots. China's fixed-asset
investment dropped 1.6% in the January-July period compared with
the year-ago period, narrower than the 3.1% decline in the first
half of the year and a touch better than economists' estimates.
Investment in the property sector, which has rebounded quickly
amid credit easing, accelerated its year-over-year growth rate to
3.4% in the first seven months of 2020, while home sales for the
first time this year moved into positive territory by growing 0.4%
in the January-July period from a year earlier.
Though falling short of market expectations, China's factory
production and retail-sales figures enjoyed a boost from the
recovering auto sector in July, with both vehicle production and
sales growing strongly, official data showed.
With the recovery on firmer footing, China's central bank
signaled last week that it would ease off its looser
post-coronavirus monetary policy, in a bid to curb speculation in
the country's property and stock markets. Both bank and nonbank
credit were scaled back sharply in July, according to data released
Tuesday, as financial regulators moved to rein in rising debt
Raymond Yeung, an economist at investment bank ANZ, said that
while the central bank has retreated somewhat from its earlier
easing mode, the People's Bank of China remains a long way away
from tightening its policy stance, given the challenges the economy
is still facing in the remaining months of the year.
The intensifying U.S.-China rivalry, in particular, has cast a
cloud over Beijing's economic outlook despite better-than-expected
export data in recent months, as economists question how long the
resilience in outbound shipments can continue amid a resurgence of
coronavirus infections and a more hostile business environment for
Chinese companies in many developed Western countries.
In recent weeks, Chinese leader Xi Jinping and other senior
officials have talked up the importance of relying more on the
domestic market as its relationship with many Western economies
Grace Zhu and Bingyan Wang contributed to this article.
Write to Jonathan Cheng at firstname.lastname@example.org
(END) Dow Jones Newswires
August 14, 2020 02:49 ET (06:49 GMT)
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