The repercussions of “Corona” led to a decline in “industry” and “services” and a decrease in consumer confidence

China's economy shows remarkable slowdown

Chinese consumers remain vigilant every time a new wave of infections emerges.

From the source

Chinese official data showed a noticeable slowdown in the growth of the country's industrial sector, and a decline in production during last June, attributing this to the noticeable decline in demand for exports.

A report by the Wall Street Journal revealed that the data showed a decline in some Chinese economic indicators, including a drop in demand for the service sector. Operations in Yantan Port in Shenzhen, China, one of the busiest ports in the world, fell to 30% of its operating capacity, As of late May, Chinese officials told the newspaper.

lower expectations

These indicators come at a time when global financial institutions have reduced growth expectations in the second largest economy in the world, as “Morgan Stanley” and “Barclays” reduced their forecasts for Chinese GDP for the current year, to less than 9%, pointing to the impact of high prices for raw materials production and consumption.

China's National Bureau of Statistics also noted that the official manufacturing PMI fell slightly to 50.9 points last June from 51.0 points in May.

The bureau said the sub-index, which measures production, fell to 51.9 points in June, from 52.7 the previous month, as recent shortages in semiconductors, coal and power slashed output at many factories.

The chip shortage crisis, which affected global auto manufacturers, affected automakers in China, which kept the sub-index of auto manufacturing shrinking for two consecutive months.

weakness

Chinese officials stated that the sub-indices, which measure oil, coal and metallurgical industries, also weakened, which affected the total demand, noting that the emergence of cases of the “Corona” virus in the southern province of Guangdong, an economic and export stronghold, added stifling pressure on manufacturers, Consumer confidence has been weakened.

With the relatively slow process of vaccine distribution in China, and the restrictions imposed by the outbreak of the virus, consumers have remained cautious each time a new wave of infection appears, forcing economists to rein in their expectations, after the failure of the hoped recovery in consumer spending.

export

In addition, the sub-index of new export orders fell deeper into contraction territory, reaching 48.1 points in June, from 48.3 points in May, indicating weak external demand for Chinese goods.

But as the first major economy to be able to confront the Corona pandemic, last year, China benefited from strong global demand for its export goods, which strengthened the ability of the Chinese export sector to meet the challenges related to market expectations.

changes

The chief economist at the World Bank and head of the China, Mongolia and Korea program, Sebastian Eckhardt, believes that there are changes in world trends, as lifting the precautionary restrictions related to the outbreak of the “Corona” pandemic in Western countries leads to a shift in the spending of wealthy consumers, away from buying expensive goods. The price is to spend on personal services.

Eckhardt expected that the contribution of net exports to China's overall growth will diminish, and that China's current account surplus, which includes foreign trade of goods and commercial services, will decrease to about 1.4 percent of GDP this year, down from 1.9 percent last year.

He said that with exports slowing in China, imports are recovering on the back of stable domestic demand, stressing the importance of the Chinese leaders' call for a further shift towards domestic consumption.

Cautious

Last Wednesday's Chinese economic data provided more reasons for caution than optimism.

China's National Bureau of Statistics said the country's official non-manufacturing PMI, which includes measures of services and construction activities, fell in June to 53.5 from 55.2 in May, reflecting a rapid slowdown in market demand.

• Expectations of a diminishing contribution of net exports to the overall growth of China.

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