China’s economic growth held steady at 7 percent in the latest quarter, its weakest level since the global crisis, but better retail sales and factory output in June suggest government efforts to reverse the slump might be gaining traction.
THE DOWNTURN: China’s sizzling economic growth has cooled from its 2007 peak of 14.2 percent as the ruling Communist Party tries to steer it to a more sustainable rate based on domestic consumption instead of trade and investment. But an unexpectedly abrupt decline in the past two years raised fears of politically dangerous job losses.
BEIJING’S RESPONSE: The communist government has cut interest rates four times since November, allowed credit to grow and pumped money into the economy through mini-stimulus measures including higher spending on building public works.
POSSIBLE IMPROVEMENT: Retail sales growth accelerated in June to 10.6 percent, up 0.5 percentage points from May’s rate. Factory output rose 6.8 percent, an improvement of just under 1 percentage point from the previous month.
ANALYST’S TAKE: ”There are good reasons to think that the latest figures are mirroring a genuine stabilization of conditions on the ground,” said Julian Evans-Pritchard of Capital Economics in a report.
STOCK MARKET SLUMP: Growth probably was buoyed by a stock market boom that brought a flood of revenue to brokerages, analysts say. The market has fallen from its early June peak, which prompted concern consumers might tighten their belts. But analysts say the impact should be limited, because fewer than 10 percent of Chinese households own stocks, compared with up to one-third in the United States or Europe.
PUBLIC PESSIMISM: ”I’m not optimistic about the economic outlook in the second half of the year,” said Wang Zhong, 30, who works in purchasing for a Shanghai restaurant chain. He said his company has reduced its workforce and gave no raises this year.