The woman is looking at herself on her phone as she buys a warm winter hat at a vendor shop in the Punjaan market in Beijing, China on December 6, 2024.
Kevin Freyer | Getty Images
China’s economy showed modest pickup for the first two months of the year, according to data released Monday by the National Bureau of Statistics as Beijing repeated its plans to strengthen domestic consumption.
Retail sales, which are in line with Reuters estimates, grew by 3.7% year-on-year in December, increased by 4.0% from January to February.
Industrial production rose 5.9% in the first two months of the year from a year ago, slower than the 6.2% growth in December, but faster than analysts projected to expand by 5.3% in Reuters polls. It said that the growth in industrial output for the equipment production and high-tech manufacturing sectors is increasing by 10.6% and 9.1% per year, respectively.
Fixed asset investment reported year-on-year increased by 4.1%, breaking the 3.6% growth estimated by economists, a noticeable jump from the 3.2% increase last year.
The Statistics Agency said the improvements in economic activity at the beginning of the year “flagrating a more complex and challenging external environment, insufficient domestic demand, and difficulties in operation and production,” according to a CNBC translation.
“The foundation for a sustainable economic recovery remains unstable,” he added.
The data comes shortly after Chinese policymakers unveiled a wide range of plans to stimulate domestic consumption and repeated Beijing’s pledge to strengthen residents’ income and household expenditure.
The notice, published on Sunday, reiterated Beijing’s plans to stabilize the stock market, establish a childcare subsidy system and boost tourism.
While the high-level documentation doesn’t seem to have any specific implementation details, ING’s China Economic Director Lynn Song offers Beijing’s stance at a glance to address some deep issues, such as revenue growth and inadequate social safety nets.
“Directionally, it is very encouraging for policymakers to look at these topics calmly, and should help in the long-term transition to a consumption-driven economy,” he added.
According to LSEG data based on official figures, China’s unemployment rate in urban areas rose to 5.4% in February, reaching its highest level in two years.
Individual data on Monday showed new home prices in China fell 4.8% from February before the decline, less than the 5.0% decline in January.
Investments in real estate development fell 9.8% year-on-year in two months compared to a 10.6% decline in December. The data mirrored policymakers’ efforts to provide credit support to cash-bound developers, Zichun Huang, a Chinese economist in capital economics, in a memo.
Growth goal: “It’s not easy”
China’s leadership has accomplished a significant amount of challenges this year by maintaining its “approximately 5%” growth target. This was considered difficult to reach, given the rising trade tensions with the US, and it was difficult to reach deflationary pressures that had been entrenched in the economy.
Statistics Bureau spokesman Fu Lingui said at a press conference on Monday that achieving this year’s growth targets is “not easy.”
Economists say that Beijing will need to provide stronger stimuli to meet this year’s growth targets and strengthen domestic consumption to fill the remaining holes as exports could slow down. Exports contributed almost a quarter of China’s GDP last year.
China’s export growth slowed significantly in the first two months, but imports plunged due to a lack of domestic demand. Consumer price inflation in February fell below zero for the first time in over a year.
Beijing has revised its annual inflation target to “about 2%” (lowest in over 20 years), showing its official acceptance of the current deflationary environment, exceeding 3% over the past few years.
As part of the expanded fiscal package, Chinese leaders pledged an additional 300 billion yuan ($41.5 billion) of superfinance ministry debt at their annual parliamentary meeting earlier this month to support consumer subsidies.
Still, beyond the trade-in program, existing stimulus packages do not directly target consumers.
Beijing’s directive to promote consumption is “a step in the right direction… But as with other policy directives, its effectiveness depends on how it is implemented at the regional level, and the number of Alfredomon Farher, the head of the China Centre for the Conference Committee.
