Sino File | China must redirect its state-led capitalism to reverse its downward economic trend
- Although headline growth decelerated in the second quarter, several key activities rebounded in June, with some key indicators surpassing expectations
- However, many economists have warned that the June spike will almost certainly not translate into the beginning of a new upward trend as the gains are not sustainable, writes Cary Huang
China’s current economic woes are not exclusively about its record-low growth figures, but also about when the decade-long downward trend will halt and how its state-led capitalism should be redirected.
The 6.2 per cent growth in gross domestic product in the April-June period is the lowest quarterly figure since records began in March 1992.
After a 6.4 per cent rise in the first quarter, the world’s second-largest economy grew 6.3 per cent across the first half of this year, which is still within Beijing’s annual target of between 6 and 6.5 per cent and the envy of most major economies.
Although headline growth decelerated in the second quarter, several key activities rebounded in June, with some key indicators surpassing expectations after a slower-than-expected period in April and May.
Industrial production expanded 6.3 per cent year-on-year in June, accelerating from 5 per cent growth in May.
Supply-side fixed asset investment (FAI) increased 6.3 per cent year-on-year in June, compared with 4.4 per cent in May. The January-June period saw such investment grow 5.8 per cent, up from 5.6 per cent between January and May.
On the demand side, retail sales came in stronger than expected, growing 9.8 per cent year-on-year in June from 8.6 per cent in May, fuelled by a surprise surge in car sales. After 13 months of contracting, car sales rebounded by 17 per cent year-on-year in June.