China’s economy has slowed down, mostly because of trade problems with the US and a property market crisis that won’t go away. In the second quarter of 2023, the world’s second-largest economy increased by 5.2%, which is a little less than the previous quarter’s 5.4%. This slowdown shows that things are getting harder, but it’s not as bad as many economists thought.
The country has been able to escape a precipitous downturn, even though things are tough. Beijing is still helping, and the trade conflict with Washington is on hold.
How is China’s Economy Navigating Manufacturing Growth and Retail Decline?
China’s National Bureau of Statistics (NBS) reported that the economy “withstood pressure and made steady improvement despite challenges”. This strength is shown by a 6.4% rise in manufacturing, which was fuelled by demand for high-tech goods, including 3D printers, electric cars, and industrial robots. The services sector, encompassing finance, technology, and transportation, also experienced growth.
Conversely, the growth in retail sales seems to be slowing down, with a decline of 8% in June. In June, the prices of new homes in China experienced their highest rate of decline in eight months. Despite efforts to assist, this data indicates that the real estate market continues to face challenges. Here is the link to our article on Trump’s Tariff Strategy
What effect have the US tariffs had on China’s growth?
Trump’s tariffs, the primary cause of the trade war between China and the US, have negatively impacted the Chinese economy. However, the effect has not been as severe as expected. Gu Qingyang, an economist at the National University of Singapore, said that China is still “highly resilient” despite the problems. He said that the country’s export growth was helped by businesses racing to send items before new taxes or changes to export rules go into effect. Despite the short-term benefits of these efforts, experts predict increased uncertainty in the second half of the year. The economy may need more government stimulus to keep going.
Will China be able to achieve its goal of 5% growth?
Some experts believe that China may not achieve its 5% growth target each year, but they still consider a minimum growth rate of 4% to be politically acceptable. Dan Wang, an economist with the Eurasia Group, said that even if reaching the target may be challenging, China’s leaders will probably try for a growth rate that stays above this level to keep things stable.
Both parties are under pressure to resolve their differences as the deadline for a long-term trade deal with the US approaches. Even though things have gotten better, the tariffs put in place during the trade war have had long-lasting effects on China’s economy, especially in the real estate and retail sectors. Here is the link to our article on Support for Economic Growth
Final Thoughts: Is it possible for China to get back on track?
China’s economy has been growing more slowly, yet it remains quite strong. China’s economy is going through challenging times, but with the government’s help and a shaky truce with the US, it is managing to cope. However, the second half of the year will likely bring more uncertainty, and the government may need to intervene again to ensure that the 5% growth objective remains achievable.
