China’s economic growth slowed to still strong 7.9% a year earlier in the three months ending in June, as the rebound from the Covid-19 pandemic stabilized.
As expected, the growth reported on Thursday fell from the explosive 18.3% in the previous quarter, which was amplified from early 2020, when the world’s second-largest economy closed factories, stores and offices to combat the coronavirus.
China led a global recovery after the ruling Communist Party declared the disease under control last March and reopened most industries.
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The United States and other major economies are rebounding, but some are hampered by the spread of new virus variants. The rapid recovery in the United States has led the Federal Reserve to suggest that it may start loosening its stimulus measures sooner than expected, at the end of next year instead of 2023.
China’s growth in the April-June quarter over the previous three months, as other major economies report results, was 1.3%, reflecting a return to normal factory activity and consumer spending as government stimulus and the credit facility wane. This was up from the 0.6% expansion of the January-March period over the last three months of 2020, but was still among the weakest quarters of the past decade.
“Overall, the Chinese economy appears to be on the right track for recovery,” Chaoping Zhu of JP Morgan Asset Management said in a report. The latest data, Zhu said, suggests that the economy “has already peaked and is returning to its long-term average growth rate.”
China’s outlook is clouded by a persistent trade war with Washington over Beijing’s industrial development tactics. President Joe Biden has said he wants better ties with Beijing, but has yet to say whether he will reverse tariff increases imposed by his predecessor, Donald Trump.
Treasury Secretary Janet Yellen this week called for a “united front” with Europe against China’s “unfair economic practices”. Biden expanded the list of Chinese companies that Americans are prohibited from investing in due to possible military connections.
Yet Chinese manufacturing, auto sales and consumer spending have exceeded pre-pandemic levels.
The International Monetary Fund and private sector forecasters expect economic growth of around 8% this year, but say it is expected to decline in 2022. The government is in the midst of a marathon effort to steer China towards slower and more sustainable growth based on domestic consumption instead of exports and investments.
“With production already above its pre-virus trend, the economy is struggling to gain ground at its usual rate,” Julian Evans-Pritchard of Capital Economics said in a report. “Head winds to growth are expected to intensify in the second half of the year.”
Global markets took the update in stride. Benchmarks rose in Hong Kong and Shanghai, while US futures were slightly lower.
Beijing is in the midst of two campaigns to step up oversight of a fledgling industry of online finance competitors such as tycoon Jack Ma’s Ant Group and to reduce risks to the financial system by forcing the real estate industry to reduce levels of investment. indebtedness.
“Both are going to put downward pressure on growth in the near term,” ING’s Iris Pang said in a report.