New problems appear to hinder China’s economic recovery

New problems appear to hinder China’s economic recovery

China’s industrial output growth slowed in April, while retail sales fell far short of expectations.

China’s economy is forecast to grow by more than 8% in 2021. File photo: AFP

According to Reuters news agency, Chinese officials have warned of new problems affecting the recovery of the world’s second-largest economy.

Global supply chain bottlenecks and rising raw material costs have weighed on manufacturing activity in China, hampering the economic recovery since last year.

China’s factory output rose 9.8% year-on-year in April, matching forecasts, but falling short of March’s 14.1% growth, according to data compiled by the State Administration of Statistics. China national millet published today 17/5.

Meanwhile, retail sales in China in April increased only 17.7%, much lower than the forecast of 24.9% increase and the increase of 34.2% achieved in March.

China’s National Bureau of Statistics spokesman Fu Linghui said that while China’s economy recorded steady improvement in April, new problems have also emerged, notably international commodity prices increased.

“The foundation for the domestic economic recovery is still not guaranteed,” Fu Linghui said at a press conference on May 17 in Beijing.

“For enterprises in general, the price increase is beneficial to improving operational efficiency, but the pressure on downstream industries should be noticed,” added the representative of China’s National Bureau of Statistics. .

Factory producer price index in April reached the highest rate since October 2017. The index may continue to rise in the second and third quarters of 2021, according to a report released by the People’s Bank of China last week.

Motor vehicle production growth slowed sharply from 69.8% to 6.8% in April, partly due to a severe shortage of semiconductors used in auto manufacturing.

Cement and coal production growth in China also slowed in April, while aluminum and crude steel production hit a record, thanks to steady demand.

Zhiwei Zhang, chief economist at Pinpoint Asset Management, said: “The Chinese economy has shown signs of unbalanced recovery, while exports and domestic investment have increased sharply, while domestic investment and exports have increased sharply. Other areas such as consumption are still weak.”

This expert assessed, service sectors in China such as tourism, resort, and entertainment are still being held back by uncertainties caused by Covid-19.

According to data from China’s National Bureau of Statistics, April home appliance sales fell sharply from the previous month, falling from a 38.9% increase in March to 6.1%.

Julian Evans-Pritchard, senior economist at economic consulting firm Capital Economics, assessed that China’s monthly retail sales growth has slowed down much compared to before the pandemic.

“In the short term, we expect the consumer recovery to accelerate again in the coming months as the labor market continues to tighten,” said Julian Evans-Pritchard.

China’s exports increased rapidly in April thanks to strong demand for Chinese goods while production activities in other countries remained stalled due to the epidemic.

However, April also recorded a slowdown in factory activity amid congested input supply and high costs. According to Reuters news agency, Chinese policymakers have identified a number of weaknesses in this economic recovery.

“Production costs have definitely increased, causing profits to drop,” said the director of an auto parts factory in Zhejiang province. The director added that sales are increasing but relatively slowly and the factory has plans to cut production.

China’s economy recorded a record 18.3% growth in the first quarter of 2021, and many economists expect the world’s second-largest economy to grow more than 8% in 2021.

China will encourage manufacturing and private investment to recover as quickly as possible. Last month’s meeting of the Chinese Politburo said that the country’s economic recovery is still uneven and the recovery foundation is not solid.

Economic indicators released on May 17 also showed that fixed asset investment in China in the first four months of 2021 increased by 19.9% ​​year-on-year, but lower than the increase of 25. .6% of the first quarter.

In addition, real estate investment growth, real estate sales by floor area and number of new constructions in the first four months of 2021 all decreased compared to the first quarter, in the context of the Chinese government’s increased supervision. monitor the capital mobilization activities of investors.

“The Chinese government may pause monetary tightening for now to see the pace of recovery,” said Zhiwei Zhang, chief economist at Pinpoint Asset Management.