China's Economy Grows Slower Than Expected
China’s economy did not grow as fast as many economists had expected in the second quarter of 2023, the latest in a series of economic results that signal that the global economy is entering into a significant slowdown. Moreover, this result will add to fears that China’s economy will no longer provide as much impetus for growth for the global economy as it has done in previous years.
In the second quarter of this year, the Chinese economy expanded by 6.3% on a year-on-year basis (0.8% quarter-on-quarter). While this was the highest rate of year-on-year growth for the world’s second-largest economy in two years, this was mostly due to the poor result for the Chinese economy in the second quarter of last year.
On the positive side, Chinese manufacturing output rose in recent months, albeit at a pace well below that of previous years. Furthermore, the lifting of Covid-related restrictions late last year continued to positively impact many sectors of the Chinese economy.
However, China’s economy is facing many problems, Most notably, exports have declined sharply in recent months as global demand weakens. At the same time, retail sales growth in China has been disappointing this year, while the country is facing the threat of deflationary pressures. Furthermore, there are fears that China’s vast real estate market is highly unstable and could cause major problems for the Chinese economy in the months ahead.
A Look Ahead
For years, Beijing has been attempting to transform the Chinese economy into one that is less dependent upon manufacturing exports for growth. Rather, the government would like Chinese domestic demand to drive growth, but this has faltered in recent years.
The results from the second quarter will add to the fears of a more pronounced slowdown for the Chinese economy. Furthermore, there are many troubling economic and geopolitical developments that could result in difficult times for China’s economy.