China’s economy recorded a more modest growth in the second quarter as issues in the real estate sector restrained spending across the country. According to figures released by the National Bureau of Statistics, the Asian powerhouse expanded 0.7% in the three months to June from the previous quarter, decelerating from the 6.1% increase in the first quarter projected on an annual basis.
When compared to the same period last year, GDP growth eased to 4.7% from 5.3% in the January-March period. The second quarter figures came slightly below forecasts and point to softening economic conditions. Private consumption, a crucial growth driver, has remained tepid as the slump in property market feeds into uncertainty.
Meanwhile, slowing global demand has also impacted China’s exports which saw brisk expansion earlier in the pandemic. Export revenues, while contributing to overall growth, have failed to offset weak private spending at home. The real estate sector, a major employment generator, is battling large debtor defaults which has led to stalled housing projects across the country.
Local governments grappling with falling revenues have upped tax collections and raised fees adding to the squeeze on household incomes. Auto sales have also dipped despite price discounts by manufacturers, reflecting persisting consumer reluctance. Until housing construction picks up significantly and debts in the sector are addressed, domestic spending is expected to remain constrained limiting China’s growth potential in the near term.
