China Receives Rash Of Bad Economic News

The People’s Republic of China received a number of bad economic markers this week, including industrial production and unemployment. The negative outlook follows a number of other trailing economic factors that could push Beijing into recession.

The Chinese industrial market lagged in May, showing an increase in industrial production of 3.5%. This met expectations but was significantly lower than the previous figure of 5.6%. 

Furthermore, the country’s retail sales increased by 12.7%, missing the 13.7% estimate and falling well short of the previous 18.4% figure. 

In addition, investments in urban fixed assets increased by 4.0%, which was below the 4.4% estimate and significantly below the previous figure of 4.7%.

The overall urban unemployment rate stayed the same at 5.2%, which also met expectations. However, the unemployment rate for those aged between 16 and 24 reached a record high of 20.8%, about double the figure five years prior.

The slower-than-expected economic data caused China to reduce one of its key interest rates, even at a time when many other nations have been hiking rates to quell high inflation.

The news and rate cut caused a decline in the value of the Chinese yuan.

China has been struggling with an ongoing decline in construction. Due to the fact that real estate represents about 25% of the nation’s economy, there is an increased chance of a further slowdown. 

In 2022, residential floor space sales fell by more than a quarter, and real estate investment dropped by about 10%.

The negative economic news comes as Beijing and regional governments struggle with a high debt load.

Local and regional governments have taken on much of this increased debt, which is estimated to exceed $9 trillion. This total represents about half of the country’s gross domestic product (GDP). This has put increased pressure on Chinese banks to cut interest rates.

In particular, Chinese banks officially hold 1.5 trillion yuan in non-performing loans, though there are fears that the true figure may be closer to 20 million yuan.