The world’s second-largest economy saw a rebound in activity in June after many health restrictions were lifted, notably in Shanghai, the economic capital, which was confined to two months in the spring.
But this recovery remains fragile and depends on the so-called “zero covid” health policy, which burdens the economy with restrictions and unexpected shutdowns of businesses once positive cases are detected.
To support the activity, the central bank unexpectedly cut bank refinancing rates (repo) on Monday.
The seven-day rate was set at 2% (versus 2.10% previously), while the one-year rate was lowered to 2.75% (versus 2.85%).
The goal is to increase liquidity for banks and ultimately encourage them to give more credit to support the activity.
” However, this is definitely not enoughHappy analyst Julian Evans-Pritchard of Capital Economics.
‘Uncertainty’ caused by anti-Covid restrictions and Trustworthy loss In the real estate market are the main obstacles to recovery, notes Mr. Evans-Pritchard.
distressed real estate
Especially since in recent weeks China has faced an epidemiological recovery, which was certainly limited in terms of cases but is now affecting many counties.
Tens of thousands of tourists are noticeably crammed into the tropical island of Hainan (south), which is a very popular destination in China at this time of year.
The restrictions also affect the city of Yiwu (east), which is known for its huge market for goods destined for export.
This epidemic recovery adds to the difficulties that were already pressing the Chinese economy: sluggish consumption, the role of Beijing in the face of many dynamic sectors including the technology sector, shortness of breath in the global economy, as well as the real estate crisis.
In July, new home prices contracted again (-0.9% y/y), according to figures from the National Bureau of Statistics (BNS) relating to an average in 70 cities.
Overburdened with debt, many developers are struggling to persuade new buyers and some to continue their projects.
A growing number of angry landlords are also refusing to pay their monthly installments, which could aggravate the situation in the sector.
Real estate, which accounts for more than a quarter of China’s GDP, has long served as an engine of growth.
impede economic growth
The deterioration of this sector and the risk of new restrictions related to Covid will hinder” so far Growth in the second half, warns economist Ting Lu of Nomura Bank.
Already in the second quarter, the country recorded a GDP increase of just 0.4% year on year, its worst performance since 2020.
The Swiss National Bank said on Monday that retail sales and industrial production unexpectedly slowed then in July.
Retail sales, the leading indicator of household spending, rose 2.7% on an annual basis, compared to 3.1% in June.
On the contrary, analysts expected an acceleration (+5%), thanks to the resumption of activity in the country, which was severely sanctioned in the spring due to the blockade of Shanghai.
For its part, industrial production rose by 3.8% in one year, but this rate is lower than in June (+3.9%) and analysts’ expectations (+4.6%).
For its part, investment in fixed assets slowed the most in July (to 5.7%). This is the fifth consecutive month of decline and another sign that the economic outlook remains bleak.
The unemployment rate decreased slightly in July to 5.4% (versus 5.5% in June). But it increased sharply among 16-24-year-olds, reaching 19.9% (versus 19.3% in June).