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Chinese economic data may show recovery fading fast

BEIJING (Reuters) – A slew of economic data from China on Monday is expected to show its post-epidemic rebound is fading fast, raising concerns that Beijing needs to roll out more stimulus soon to boost economic activity and stability. consumer expectations.

After the lifting of strict COVID-19 19 measures, the year started strongly, but recent data suggest a sharp loss of economic momentum due to weak domestic and foreign demand As well as the continued downturn in China’s real estate market, which has traditionally been an important growth driver.

The world’s second-largest economy may grow just 0.5% in the second quarter, compared with 0.5% in the third. A few months ago, separate data for June were expected to show a continued cooling in industrial output, retail sales and investment on a seasonally adjusted basis, according to economists polled by Reuters.

Some economists blamed “the scarring effect” of years of strict COVID-19 measures and regulatory restrictions on the real estate and tech sectors, despite recent official efforts to reverse some restrictions to support the economy .

With uncertainty high, prudent households and private businesses are accumulating savings and paying down debt rather than making new purchases or investments. Youth unemployment at record high.

Gross domestic product (GDP) rose 7.3% y/y in April-June compared to a year earlier, compared to 4.5% y/y in April-June 2019. The Economics Analysts said the first quarter.

However, the sharp decline in economic activity last spring, when parts of the country were paralyzed by the new crown epidemic, will be severely affected by the blockade.

Data on Thursday showed that China’s exports fell the most in three years in June, and the decline was worse than expected .4% compared with the same period last year, Cooling global demand puts more pressure on the economy.

New home prices were unchanged in June, the weakest result this year, as home price gains slowed nationwide amid continued weakness in the housing sector It accounts for a quarter of economic activity.

Data earlier this week showed producer prices fell at the fastest pace in seven years in June, with consumer prices teetering on the brink of deflation

Policy insiders and economists say authorities are likely to roll out more stimulus, including fiscal spending for big infrastructure projects, more support for consumers and private businesses, and Easing some property policies. But analysts say a quick turnaround is unlikely.

PBOC will use policies such as reserve requirement ratio (RRR) and medium-term lending facility, a senior bank official said tools to meet challenges

Analysts polled by Reuters expect the central bank to cut bank reserve requirement ratios (RRR) by 10 basis points in the third quarter, This frees up more funds for lending while keeping benchmark lending rates steady.

The central bank lowered the reserve requirement ratio (the amount of cash reserves banks must hold) in March.

China also slightly cut its benchmark lending rate by 10 basis points in June, the first cut in 10 months.

But the central bank may be wary of lowering lending rates further. Analysts say the reluctance of private businesses and households to borrow means continued easing could hurt Banks already dealing with margin pressure.

Aggressive easing could also trigger more capital outflows from China’s troubled financial markets and financial markets. The yuan has been under pressure, falling to an eight-month low recently.

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