At the beginning of the second half of the year, China’s already shaky economy sputtered even more as unanticipated factory slowdowns, a worsening real estate market downturn, and the threat of widespread job cutbacks persisted.
In July, manufacturing activity increased less quickly than anticipated compared to June, when broad COVID lockdowns were removed, according to a private poll released by Caixin on Monday. On top of that, a negative official survey released on Sunday revealed that the sector actually shrank in January.
On Monday, China Index Academy, one of the biggest independent real estate research firms in the nation, released a survey that revealed property sales by floor area in 17 cities it tracks fell 33.4 percent in July compared to a post-lockdown jump of 88.9 percent in June. This was because buyers avoided a market that was becoming more and more saturated with desperate sellers.
The top officials of the nation indicated this week that they were ready to fall short of the 5.5 percent government growth target for 2022, the year that President Xi Jinping is anticipated to win a record-breaking third term in office.
Despite worries about a global recession, unpredictability from the Ukraine war, and the possibility of recurrent COVID lockdowns at home, the second quarter’s gross domestic product only increased by 0.4 percent year over year. Nonetheless, authorities have so far refrained from implementing significant stimulus.
“Stagnation is what everyone is worried more after the second quarter (GDP) fell into a hole,” stated Nie Wen, a Hwabao Trust economist headquartered in Shanghai.
“In the second half, what matters more economically would be to quicken the recovery of consumption.”
After COVID lockdowns were lifted in some locations, including Shanghai, retail sales rebounded in June, up 3.1 percent year over year. Additionally, the unemployment rate decreased from 5.9 percent in May to 5.5 percent.
Due to considerable employment insecurity, consumer sentiment remained precarious.
An indicator for factory jobs dropped to its lowest level in 27 months in the Caixin survey. Companies blamed cost-cutting, weak sales, and the failure to replace voluntary departing employees for the employment reductions.
“We’ve shut down at least 10% of the factories in Jiangsu so far, and more than 80% of employees have been laid off,” Xu, the general manager of a Jiangsu province furniture manufacturer who declined to offer his full name, claimed as much.
“Although the situation has improved COVID-wise and market-wise, we haven’t seen a significant rebound in sales,” said Xu.
Consumption might not be a top concern for those still trying to hold on to their careers.
Some households are selling their residences in the capital to raise money, according to a Lianjia agent with the last name Lu in Beijing.
“A home seller is currently wanting to sell an apartment worth 6 million yuan in northern Changping district because a reduction in income from his job has increased the pressure on his ability to repay 4 million yuan due in mortgage loans,” Lu told.
“There are also some potential home buyers who have chosen to postpone their purchases because of the instability of their jobs.”
Long-term effects on the economy and people’s livelihoods will result from the property sector’s continued weakening, Nie of Hwabao Trust warned.
In 2015, the industry was also under intense pressure, but policymakers had allowed an increase in consumer debt to support the market at the time, according to Nie.
After the stock market crash, the collapse of the shadow banking system, and the decline of the real estate market in 2015, China’s economy failed to meet the government’s growth target.
“But at that time, consumption was still steady, not like this year,” he said.