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Chinese GDP Growth, Economic Recovery See Slowdown in 2Q21

Published 15/07/2021, 02:10 pm
Updated 15/07/2021, 02:10 pm
© Reuters.

© Reuters.

By Gina Lee

Investing.com – China’s GDP growth slowed in the second quarter of 2021, in a further sign that the economic recovery from COVID-19 continued to show signs of slowing down, according to second-quarter data released earlier in the day.

The National Bureau of Statistics (NBS) data said China’s second-quarter GDP grew 7.9% year-on-year in the second quarter, lower than both the 8.1% growth in forecast prepared by Investing.com and the 18.3% growth from the first quarter. However, it grew 1.3% quarter-on-quarter, exceeding both the 1.2% growth in Investing.com forecasts and the previous quarter’s 0.6% growth.

The data also said industrial production grew 8.3% year-on-year in June, higher than the forecast 7.8% growth but lower than the 8.8% growth recorded in May. Fixed asset investment also grew 12.6% year-on-year in June, higher than the 12.1% in Investing.com forecasts but lower than the 15.4% growth recorded in the previous month.

The unemployment rate, meanwhile, was unchanged at 5%.

Trade data released earlier in the week showed a surprise growth in June exports alongside indications of the slowdown in economic recovery. Consumers have also been more cautious spenders as incomes decreased due to COVID-19 and sporadic outbreaks of the virus restrict travel.

The data also comes as the People’s Bank of China (PBOC) cut the reserve requirement ratio (RRR) in a surprise move during the previous week, thus freeing up about CNY 1 trillion yuan ($154.55 billion) in liquidity that can be used to boost the economic recovery. This cut came into effect earlier in the day.

The central bank also rolled over a portion of medium-term policy loans coming due, signaling its unwillingness to make big changes in monetary policy.

Investors remained cautious, with Standard Chartered (OTC:SCBFF) Plc head of China macro strategy Becky Liu warning the economy needs more support and there could be more RRR cuts ahead.

“China’s growth is decent, but it’s not good enough, and the economy will likely moderate further from here... the market underestimated the central bank’s determination to ease monetary policy and support growth... the RRR cut is an obvious signal that China has entered an easing cycle. RRR is never one-off, and I expect the PBOC to reduce RRR again by year-end,” she said.

Chinese Premier Li Keqiang was also cautious about the economic outlook, saying earlier in the week that the country must prepare for cyclical risks and make appropriate counter-cyclical adjustments.

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