Stephen Innes
SPI Asset Management
China’s economic revival remains lopsided as manufacturing outpaces consumer spending, further exacerbated by a surprise uptick in unemployment—the first since February. Despite the government’s efforts to stimulate consumer activity and balance recovery, July's figures were underwhelming.
Industrial output grew by 5.1% this July year-over-year, a slight decrease from June’s 5.3%, as reported by the National Bureau of Statistics. Meanwhile, the urban jobless rate has ticked up to 5.2%.
On a brighter note, retail sales saw a modest increase of 2.7%, which, while slightly above expectations and an improvement from last month's 2%, likely benefited more from favourable seasonal comparisons and the summer holiday boost than any significant change in consumer behaviour.
This snapshot of a once thriving economy underscores a persistent drag on domestic demand, not significantly alleviated by governmental initiatives aimed at boosting consumption and addressing imbalances in the recovery process.
No amount of rate cutting seems to entice consumer spending if confidence in the economy or personal financial security is lacking.
The pressing issue of "problematic overcapacity" looms large—not merely overproduction but the kind that pressures global industries by pushing out international competitors. This has led the West to consider imposing steeper tariffs on a range of Chinese exports from electric vehicles to solar panels. The days of China deflating its economic woes through exports appear to be receding into the past.
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