China’s second-quarter gross domestic product (GDP) growth fell short of expectations, increasing by 6.3% compared to the same period last year. The youth unemployment rate reached a record high of 21.3% in June. Analysts had predicted a 7.3% rise, making this figure a disappointment. The pace of growth also slowed from the first quarter, with a 0.8% increase, compared to 2.2% in the previous three months.
Youth Unemployment Rate
The youth unemployment rate among young people aged 16 to 24 reached a record high of 21.3% in June, further highlighting the economic challenges faced by China. Fu Linghui, a spokesperson for the National Bureau of Statistics, acknowledged the complex geopolitical and economic international environment but expressed confidence that China can still achieve its full-year growth target. The government had set a goal of approximately 5% growth for 2023.
Retail Sales and Industrial Productions
Retail sales in June showed a modest increase of 3.1%, slightly below the expected 3.2%. Sales of catering, sports, entertainment products, alcohol, and tobacco experienced the most significant growth, while automobiles, office products, and daily-use goods saw a decline. Online sales of physical goods also grew at a slower pace of 6.7% compared to May.
On the other hand, industrial production for June surpassed expectations, rising by 4.4% from the previous year, compared to the forecasted 2.7%. Fixed asset investment for the first half of the year increased by 3.8%, exceeding the predicted 3.5%. Manufacturing investment maintained steady growth, while infrastructure investment experienced a slowdown.
The youth unemployment rate in urban areas stood at 5.2% in June. Looking ahead, spokesperson Fu expressed expectations that real estate investment would remain low in the near future, and youth unemployment may rise further until August before declining.
Factors Affecting the Chinese Economy
China’s economic recovery has been hampered by various factors. The initial rebound following the easing of Covid-19 controls has lost momentum, and the real estate sector continues to struggle. Additionally, declining global demand has negatively impacted exports.
Despite these challenges, domestic travel has shown promise in the recovery process. Urban residents doubled their spending on tourism in the first half of the year compared to the previous year, reaching 1.98 trillion yuan ($280 billion). However, rural residents’ travel spending only saw a 40% increase during the same period. Despite the growth in domestic travel, the overall spending in the first half of 2023 was still lower than pre-pandemic levels.
Addressing The Slowdown
To address the economic slowdown, Beijing announced the extension of property support measures and broad support for exports. The government also extended tax breaks for electric car purchases to bolster the growing electric vehicle industry. However, there is a cautious approach to implementing further stimulus measures due to concerns about escalating local government debt.
The upcoming Politburo meeting later this month is expected to shed more light on China’s economic policies and provide additional guidance for the path forward.