According to China’s National Bureau of Statistics, key economic indicators fell short of expectations in July.
In an effort to boost confidence, China’s central bank, the People’s Bank of China, lowered the two key rates on Monday, August 15. It pumped $59 billion into the financial system and cut one-year medium-term lending facility (MLF) loans by 10 basis points, from 2.85 to 2.75%. The bank also lowered short-term liquidity to banks from 2.1% to 2%.
The MLF rate cut often passes on to the loan prime rate. In China, commercial banks use the five-year prime rate as a key reference for their mortgage rate.
Economists said that China’s stimulus move on Monday would have little effect to boost consumer or business confidence as the disruption from COVID policy can happen at any time, which can ruin any growth prospects.
Chief economist with Pinpoint Asset Management, Zhang Zhiwei, told the South China Morning Post: “Domestic demand softened due to Covid outbreaks in many cities and the worsening sentiment in the property market.”
He added, “The trouble in the property market is getting worse, as suspended construction in some projects makes homebuyers hesitant to purchase new homes.”
China’s statistics bureau’s data also show that the country’s home prices fell for 11 consecutive months as stalled contractions, mortgage boycotts, and weak demand hurt sales.
An important economic indicator, China’s youth unemployment rate hit a record of 19.9% in July. This is the highest rate since China began releasing such data in 2018.
The Wall Street Journal reported that economists at Standard Chartered cut China’s 2022 growth forecast from 4.1% to 3.3%. They said, “We expect the path to China’s economic recovery to be a slog.”
July’s retail sales increased by 2.7% from a year ago and much below the expectation of 5% from surveyed economists. This indicator is a measure of consumer spending.
The country’s fixed-asset investment slowed down in July, rising only 5.7% for the first six months, compared with the 6.1% increase recorded in the first half of the year. Economists from the Wall Street Journal survey expected growth of 6.2%.