Workers at a factory that makes lithium battery products for domestic and international markets in Nantong, Jiangsu province, China.
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The world’s second-largest economy grew more slowly than expected in the second quarter, with the consumer sector a concern. Retail sales growth fell to an 18-month low as deflationary pressures forced businesses to cut prices on everything from cars, food and clothing.
While half of the 300 billion yuan ($41.40 billion) in ultra-long treasury bonds that China’s state planners announced on Thursday will be allocated to support consumer trade programs, the amount appears too small to boost economic recovery, as it is equivalent to only 0.12 % of economic output and 0.3% of 2023 retail sales.
Solid Chinese exports have provided support to factory managers in recent months and encouraged progress towards the government’s growth target of around 5%, but with many trading partners mulling import tariffs, the jury is out on whether the boost will work. .
Exports grew at their fastest pace in 15 months in June, while imports shrank sharply, suggesting domestic demand remained weak and manufacturers ordering them to face tariffs from trading partners.
Depressed domestic consumption is closely linked to falling property valuations which leave families feeling poor as 70% of household wealth is in real estate.
New home prices fell to their fastest pace in nine years in June.
Analysts expect the government to adopt policy measures that support property after a meeting of the Politburo, the ruling Communist Party’s top decision-making body, is expected to take place this week.
The official PMI will be released on Wednesday. The private sector Caixin factory survey will be released on August 1. Analysts expect a reading edge down to 51.5 from 51.8.
