The Economic Briefing by Tommy Wu, released on June 15, 2023, indicates that China’s economic recovery appears to be stalling, as shown by data from May. Here are the key highlights:
Fixed Asset Investment: This sector grew by only 0.1% month-on-month in May, with a year-on-year growth of just 1.6%. The primary drag is from real estate investment, which saw a significant decline.
Real Estate Market: The market appears unstable with real estate investment plummeting 21.5% YoY, further suggesting a continuing slump in housing construction.
Exports: These fell by 7.5% YoY in May, revealing a slowing performance amid dwindling global demand.
Inflation: May inflation remained low at 0.2% YoY, suggesting that the economy remains below potential.
Credit Demand: There was a notable decrease in outstanding bank loan growth and total social financing growth.
Policy Support: To bolster confidence, the PBoC cut the one-year Medium-term Lending Facility (MLF) rate and the 7-day reverse repo rate. This suggests that policymakers are acknowledging concerns over China’s growth outlook and are willing to increase their efforts to boost growth.
However, these measures may not be sufficient to reverse the slowing economic growth momentum, and there is speculation that the government might be considering a broad stimulus package. The report concludes that both consumer and investor confidence will have to increase for a sustained economic recovery to occur.
