Hong Kong (CNN Business) China’s economy is still growing, but the pace of its recovery slowed in the second quarter as the country faced rising commodity prices and declining commodity prices.
GDP grew by 7.9% in the April-June quarter compared to the same period last year, China’s National Bureau of Statistics said on Thursday.
That growth rate was much slower than the 18.3% annual growth rate with China enrolled in the first quarter – although that record-breaking figure showed much of the economic decline in early 2020, as the coronavirus epidemic was still raging.
The latest figure was slightly weaker than expected. Analysts surveyed by Reuters predict that China’s economy will grow by 8.1% in the second quarter.
Because China’s first recovery last year was so rapid, the country is “fully recovered,” said Julian Evans-Pritchard, China’s top economist at Capital Economics.
“In fact, it is more than just its pre-virus status,” he told CNN Business. “There is very little room for it to continue to grow rapidly, so it is meeting these challenges, which is why we are beginning to see that growth rates are very low.”
Recent warning signs
China’s economy has been shedding light on some troubling signs in recent months. Record prices have pushed inflation into the industry to its highest level in more than a decade, while imports of imports caused by deficit shipments and shortages have hampered industrial production.
Growth in the service sector has also slowed in recent years, as the Covid-19 outbreak in southern China and subsequent preventive measures reduced consumer and business activity.
“We are facing a difficult domestic and international situation, especially rising prices, which have put a lot of pressure on business costs,” NBS spokesman Liu Aihua said at a press conference in Beijing on Thursday. He emphasized the need to “deal effectively” with risk and help the growth of small and medium enterprises.
The government also released data showing that some production declined last month. Industrial revenues increased by 8.3% in June from last year, declining slightly from the May 8.8% growth. The result in automatic production fell by more than 4% last month, compared to the previous year, Liu was mainly due to a persistent chip shortage.
Domestic needs, however, remain a weak link, according to Yue Su, chief economist of The Economist Intelligence Unit.
Commercial growth slowed to 12.1% in June, down from 12.4% in May, according to data released on Thursday. This is a measure of slow growth this year.
“China’s Q2 GDP data continues to show unequal recovery,” Yue said, adding that retail sales did not return to the level seen before the epidemic.
He said rehabilitating household needs would be a “challenge,” as families still cling to savings and limited time.
Unemployment is also a cause for concern.
The unemployment rate in the cities ended at 5% in June, unchanged from May. But the youth unemployment rate has risen, jumping to 15.4% for those between the ages of 16 and 24 at the end of June, compared to 13.6% in the past three months.
“We are really under pressure to be employed,” said Liu from NBS, noting that the number of university graduates has set a new record of nearly 9.1 million people this year. “We must continue to prioritize job creation and job creation.”
It is in danger
Although the recovery of the world’s second-largest economy is slow, China is on track to exceed its annual growth target this year.
“Overall, China’s economy appears to be in the process of recovery, as it achieves a target of 6% annual growth,” Chaoping Zhu, a strategist at JP Morgan Asset Management’s global market, wrote in a research letter on Thursday. Beijing set that goal of growth in early March as it highlighted the need to get back on track with President Xi Jinping’s long-term economic goals.
The country has also enjoyed some good news recently. On Wednesday, the National Health Commission said China had used more than 1.4 billion doses of the Covid-19 vaccine, meaning the country had vaccinated at least half the population at a single dose.
And earlier this week, Beijing said exports increased by more than 30% in June compared to the same period in 2019, which is a sign that the global demand for Chinese goods is strong.
“Strengthening external demand can help alleviate some domestic pressure and support inclusive growth, even if strong export growth seems unstoppable,” Zhu said.
– Kristie Lu Stout and CNN’s Beijing office contributed to the report.