The Chinese economy again showed signs of cooling in July, with a sharp slowdown in industrial production and consumption growth far below expectations. The new data reflects the difficulties the Beijing regime faces in reviving domestic demand despite its stimulus measures.
Industrial production increased 4.5% year-on-year in July, down from the 5.3% recorded in June and the 4.8% that analysts surveyed by Reuters had expected.
This figure confirms a worrying trend for the second half of the year, after the growth of the Chinese economy during the second quarter slowed to its lowest level in three and a half years.
Chinese consumption disappoints again
One of the main problems for Beijing continues to be the weakness of domestic demand.
Retail sales grew by only 0.6% in July, compared to the 1% recorded in June. The result was also well below the 1.5% that analysts had projected.
The figure is particularly significant because it occurred during the summer vacation period, when tourist consumption usually provides an additional boost to economic activity.
Chinese consumption disappoints again
The Chinese regime has been implementing various subsidy programs to encourage the renewal of cars, appliances, and other durable goods. However, the effect of these measures seems to be losing strength.
Citi analysts noted that the pace of aid distribution decreased again in July. The daily average fell from about 9 billion yuan in June to approximately 6.3 billion.
Car sales accumulate ten months of decline
The automotive sector also reflects the weakness of the Chinese domestic market.
Car sales fell for the tenth consecutive month in July, although the rate of contraction was slower.
The contrast with exports is becoming increasingly evident. While Chinese consumers reduce or postpone purchases, manufacturers seek to offset the decline in domestic demand through greater international expansion.
Car sales have seen ten months of decline
Exports remain one of the main supports of the Chinese economy, especially due to demand linked to the global expansion of artificial intelligence infrastructure.
The weather also hit production
Chinese industrial activity also suffered the impact of extreme weather phenomena.
In July, three typhoons made landfall in China, and millions of people had to be relocated from affected areas in the industrial regions of the east and south of the country.
The weather-related disruptions added pressure to an economy that is already facing problems of domestic demand and a reduced impetus from stimulus policies.
The problem for Beijing is that an economy excessively dependent on exports is more exposed to any external shock, especially in a context of increased trade barriers and geopolitical tensions.
China maintains a huge trade surplus
The weakness of domestic consumption contrasts with the strength of exports.
China again recorded a trade surplus exceeding 100 billion dollars in July, and the annual total is on track to surpass one trillion dollars for the second consecutive year.
China maintains a huge trade surplus
This figure demonstrates the enormous export capacity of the Chinese industry, but it also exposes one of the central imbalances of its economic model: while factories maintain high production aimed at the outside, domestic consumption fails to keep pace.
The challenge for Xi Jinping and the Communist Party is precisely to ensure that growth stops depending on exports and investment and finds a more solid engine in the consumption of its own citizens.
For now, the July data shows that the measures promoted by Beijing are not fully reversing the weakness of the Chinese economy. With production losing momentum, disappointing consumption, and an automotive market that has accumulated months of decline, the regime faces a second half of the year marked by the need to recover economic dynamism.
