Is the Chinese economy stagnating or is the current situation they are in just a hiccup? There are many indications that the Chinese economy is not where it was expected to be. July exports and imports were both short of what was expected. This information has come to light even though China’s economy has seen a slight improvement in the second quarter.
Many believe that China is unable to diversify its economy, and move from just exports and factories that produce these exports. There are no doubts that the Chinese economy is in trouble. The following facts tend to underline this.
On the other hand, last month China’s statistics bureau claimed that its GDP expanded by 6.7% April-June compared to the same the months last year. Retail sales up 10.2% in July compared to June’s 10.6% – so there has been a 0.4% fall in sales between June and July.
A major problem with these figures is that China is currently benefiting from having a weaker currency. There is also the input from the UK’s Brexit vote to leave the EU. The potential implications from this are depressing economic activity worldwide. This is even though it may be a number of years before this is done, particularly since the new UK Prime Minister was against the severance.
Given all that, there is still the fact that attempts by Beijing to boost consumption in order to increase growth have so far failed to have any effect. All of that said, it may not all be doom and gloom in China’s economic future. China’s GDP increased by 6.7% April – June compared with the same quarter last year. However, this has little meaning if just on comparing one quarter to another a year earlier.
So, fundamentally, the Chinese economy has not been performing as it should. It put some of this down to flooding and other natural causes, but ultimately China must improve if it is to continue the meteoric rise in trade of a few weeks ago. Knowing the propensity of the Chinese people to react to things going wrong, this may just be a temporary lapse – but who knows?
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