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Signs of recession in the Chinese economy

In November economic indicators in China, it was observed that the signs of slowing down of the economic recovery continued. Retail sales fell 5.9 percent in November, the biggest drop since spring.

According to data from China’s National Bureau of Statistics, industrial production posted lower increases in November than in the previous month, while retail sales declined year-on-year. Retail sales, considered a measure of consumption, fell 5.9 percent in November after a 0.5 percent decline in October, the biggest drop since spring.

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Retail sales decreased by 11.1 percent in April and 6.7 percent in May due to the Kovid-19 restrictions applied in cities with large populations and critical industries and business lines, especially in Shanghai, the largest city in the country.

The decline in consumption is seen as a sign of weakening economic recovery and signs of recession. While industrial production increased by 2.2 percent on an annual basis in November, it remained below the 5.5 percent increase in October. Fixed capital investments, including infrastructure, real estate, machinery and equipment expenditures, increased by 5.3 percent in the 11 months of the year compared to the same period of the previous year. Fixed capital investments increased by 5.8 percent in the first 10 months.

Real estate investments decreased by 9.8 percent in the 11 months of the year compared to the same period of the previous year. Housing prices decreased in 70 large and medium-sized cities. In November, new housing prices in 51 of 70 cities and second-hand housing prices in 62 decreased. In October, new housing prices in 58 cities and second-hand housing prices in 62 cities decreased.

With the spread of highly contagious sub-variants of Omicron, the number of cases increased in the country in autumn, while partial closures in many cities had a negative impact on consumption. On the other hand, it was reported that online retail sales increased by 4.2 percent in the first 11 months compared to last year due to the increase in internet shopping during the closing periods. While economic indicators reveal that the recovery is fluctuating, it remains unclear whether the government’s growth target of 5.5 percent for this year will be achieved. The Chinese economy grew by 3 percent in the first three quarters.

 

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Unemployment rise cannot be stopped

The increase in unemployment and the still high youth unemployment in China are also interpreted as signs that the economic recovery is still in a fragile state. The unemployment rate in cities increased by 0.2 points compared to the previous month and reached 5.7 in November. Unemployment among the population aged 16-24 fell from 17.9 percent in October to 17.1 percent in November.

Forecasts bearish

The Asian Development Bank (ADB) revised down its 2022 and 2023 GDP growth forecasts for China and developing Asia. Reducing its 2022 GDP growth forecast for China from 3.3 percent in September to 3.0 percent, ADB also lowered its growth expectation for developing Asia from 4.3 percent to 4.2 percent.

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