Deflation in China’s economy ‘worst in wholesale price housing, exports plummeting, youth unemployment’
The Chinese economy showed signs of deflation as youth unemployment was at its worst due to a drop in wholesale prices for urban housing and a plunge in exports, and a diagnosis was made that a “quick transition” in economic policy was not possible.
Exports from China fell particularly sharply in June, and the decline in housing prices in small towns spread to the big cities.
China's National Bureau of Statistics announced on the 17th that the April-June gross domestic product (GDP) rose 6.3% year-on-year, and the unemployment rate for those aged 16-24 reached 21.3%, up 0.5p from the previous month, the worst since statistics began in 2018.
Compared to the previous period (January to March), China's economic growth rate increased by 0.8%, and is in the range of 3% on an annual basis.
Regarding the economic growth rate, Bank of Korea Governor Lee Chang-yong announced at a press conference on May 25 that the economic growth rate would be 1.1% in a scenario in which China's economic recovery is delayed and financial instability in developed countries increases, and growth rate of 1.6% in a scenario in which China's growth engine is strengthened. .
Regarding the May trade deficit, Deputy Prime Minister Choo Kyung-ho said on May 21, "After May, the deficit will improve, and in the fourth quarter, we will be able to see a completely different external performance."
<Lee Chang-yong, “China’s growth rate fluctuates by half in Korea, 1.8% growth is good excluding IT” May 26, 2023>
The New York Times said on the 17th that "sluggish spending is pushing China closer to a dangerous trend known as deflation."
"Policymakers in China don't have to fight inflation, but they may have to fight deflation or falling prices in the opposite direction due to weak demand," the Associated Press said. It was a success,” he said on the 17th.
Reuters reports that while China looks set to meet its 2023 growth target of around 5%, a deepening slowdown could lead to more job losses and increase the risk of deflation, further undermining confidence in the private sector, economists said. “As uncertainty mounts, prudent households and private businesses are increasing savings and paying down debt rather than making new purchases or investments. The youth unemployment rate is at an all-time high,” he said on the 17th.
The NYT said, “As the decline in small-town housing prices spreads to large cities, the real estate development and construction industries, which account for more than a quarter of the economy, have been hit harder.” It was already shaken by the default, and it took a bigger hit.”
“As the Chinese economy loses momentum in its post-pandemic recovery, it is expected to slow further in the coming months, given sluggish consumer demand in China and weakening demand for Chinese exports from other economies,” the Associated Press said.
“China is likely to implement more stimulus packages, including fiscal spending to fund large-scale infrastructure projects, increased support for consumers and private businesses, and easing of some real estate policies, policymakers and economists said,” Reuters reported. Analysts say a quick transition is impossible.”
Regarding the release of Chinese government statistics, the NYT said, "The unemployment rate, especially among those aged 16 to 24, which was particularly severe last year, reached 21.3%, the highest level since the start of statistics in 2018."
Richard Fattal, founder of Zencargo, a London logistics firm, said: “After the Shanghai lockdown last year, retailers in the US and Europe responded to delivery delays by ordering up to three months of inventory from Chinese factories. “Some companies are moving their supply chains out of China, which will have a longer lasting impact on Chinese exports,” he told the NYT.