China’s growth cools as export strength masks weak consumer demand
GDP growth slowed to 4.3% in the second quarter, while economists warned that weak household spending and job creation could strain Beijing.
By James Whitfield · Staff Writer
3 min read
China’s economy lost speed in the second quarter, raising fresh questions about how long exports can carry growth while households hold back spending. Al Jazeera reported that gross domestic product expanded 4.3% in the quarter ending in June, down from 5% in the previous quarter and the weakest pace in more than three years.
The slowdown came despite strong overseas sales tied to artificial intelligence-related demand and Chinese electric vehicles, according to Al Jazeera. June exports rose 27% from a year earlier, after a 19.4% increase in May, and China’s trade surplus widened to $125.6bn from $105.4bn.
Vina Nadjibulla, vice president at the Asia Pacific Foundation of Canada, told Al Jazeera that the data point to a split economy: some export sectors are expanding quickly while domestic consumption remains weak. She said China’s large export surplus will add pressure on trading partners that are already urging Beijing to reduce imbalances.
Economists cited by Al Jazeera said the problem is rooted partly in the long decline of China’s property market, where many households had placed much of their wealth. Juliet Lu, an assistant professor at the University of British Columbia’s School of Public Policy and Global Affairs, said Chinese consumers had been pushed into tying wealth to property, a sector that later suffered large losses after years of speculative investment.
Lu told Al Jazeera that property losses, along with the financial hit from the COVID-19 pandemic, have made households more cautious. She said many ordinary citizens have been squeezed, with China’s export strength and low-cost goods coming at a cost to workers.
Employment concerns
Reza Hasmath, academic faculty adviser at the University of Alberta’s China Institute, told Al Jazeera that exports are leading much of the economy, while job creation is failing to keep pace. He said that imbalance could create political and social problems for Beijing.
Hasmath said people under 25 face weakening prospects for stable work, with more risk of unemployment, underemployment and lower incomes. He warned that if China continues to rely heavily on technology-led exports instead of domestic demand, pressure could spread to older workers as well.
Hasmath also told Al Jazeera that Beijing’s long-standing promise of rising wealth is changing. He said government messaging is shifting toward social contribution and lower expectations for personal enrichment.
Mark Kruger, an economist affiliated with the Centre for International Governance Innovation and the Yicai Institute, told Al Jazeera he does not expect Beijing to launch a major fiscal stimulus. Kruger said the government appears more focused on reducing debt than increasing spending, and he noted that average growth so far this year is 4.7%, within a 4.5% to 5% annual range.
Oil risks add pressure
Al Jazeera reported that the weaker growth figures also come as energy markets face disruption linked to the United States and Israel’s war on Iran, Tehran’s retaliation against energy sites of US allies, and restricted passage through the Strait of Hormuz, a route used for about one-fifth of global oil supplies, including shipments to China.
Rachel Ziemba, senior adjunct fellow at the Center for a New American Security, told Al Jazeera that lower Chinese oil imports in recent months helped steady the global economy as China drew on reserves. She said China is entering the third quarter with oil supplies disrupted again, and higher fuel costs could lift inflation, curb demand and weaken growth.
This story draws on original reporting from Al Jazeera.