What’s Going On Here?Data released on Friday provided a glimmer of hope for the Chinese economy. What Does This Mean?China’s economic reports have read like British weather forecasts lately, with little sunshine and non-stop rainy days. But at long last, here comes a bright spell: Chinese retail sales – a telling metric in the world’s biggest consumer market – were up 5.4% in August versus the same time last year, well above the 3.5% that economists had predicted. What’s more, overall industrial production (things like factory output) managed to grow 4.2% last month, despite dips in major categories like cement and steel.
Still, China’s good news came with some caveats. For one, the country’s been subsidizing electric vehicles by halving the tax on new passenger cars, and those handouts have been behind much of the country’s boosted sales and production. And for another, industrial output was spurred on by a jolt in electricity production during the summer’s heatwave – and that’s unlikely to continue for long. Why Should I Care?Zooming in: Real estate recession.
Despite the somewhat reassuring figures, China’s domestic demand is still pretty feeble. That’s especially obvious in the country’s all-important property market: Chinese developer Country Garden said last month that real estate had “slid rapidly into severe depression”. And that wasn’t an exaggeration: the Chinese property market has experienced more contractions than an entire labor ward lately, with separate data showing home prices have now declined every month for the past year.
The bigger picture: Touch-and-go growth.
The Chinese government’s been upping its game in a bid to spur growth, spending freely on infrastructure and cutting key interest rates. It’s likely to keep that up too, which might be why Bank of America economists still believe China’s economy could grow 3.5% this year – even as the country sticks to its industry-shrinking zero-Covid strategy and prepares to tackle a situation that many have called more daunting than 2020. | 
