China’s economic growth slowed to a still-strong 7.9% over a year earlier in the three months ending in June as a rebound from the coronavirus leveled off.
Growth reported Thursday was down from the previous quarter’s explosive 18.3%, which was magnified by comparison with early 2020, when the world’s second-largest economy closed factories, stores and offices to fight the coronavirus.
Growth in the April-June quarter over the previous three months, the way other major economies report results, was 1.3%, reflecting a return to normal for factory activity and consumer spending as government stimulus and easy credit wind down. That was up from the previous quarter’s 0.6% expansion over the final three months of 2020.
“Overall, China’s economy looks to be on track for recovery,” said Chaoping Zhu of JP Morgan Asset Management in a report. The latest data, Zhu said, suggest the economy “has already peaked and is easing back to its long-term average growth rate.”
Still, China’s economic outlook is clouded by a lingering trade war with Washington. President Joe Biden says he wants better relations with Beijing but has yet to say whether he will roll back tariff hikes imposed by his predecessor, Donald Trump.
Exports, reported Tuesday, surged 32.2% in June over the year before, though a government spokesman warned trade growth might weaken.
China led the rebound from the coronavirus after the ruling Communist Party declared the disease under control last March and allowed most commercial activity to return to normal.
Manufacturing, auto sales and consumer spending have recovered to above pre-pandemic levels. Exporters benefited from the relatively early reopening while China’s foreign competitors still were hampered by anti-disease controls.
The International Monetary Fund and private sector forecasters expect economic growth this year of about 8% but say that should decline next year. The government is in the midst of a marathon effort to steer China to slower, more sustainable growth based on domestic consumption instead of exports and investment.
China’s economy shrank by 6.8% in last year’s first quarter, the worst performance since at least the mid-1960s. Activity started to recover in the second quarter, when the economy expanded by 3.2% over a year earlier. That accelerated to 4.9% in the third quarter and 6.5% in the final three months of the year. For the full year, growth was 2.3%, while the U.S., European and Japanese economies contracted.
In an apparent effort to reassure the public and financial markets, the government took the unusual step Thursday of reporting average growth in the second quarter and the same period of 2020 was 5.5%, up from 5.0% for the first quarters of the two years.
Retail spending has revived more slowly than manufacturing, prompting concern that might weigh on the recovery. That led Beijing to inject extra money last week into the pool available for lending to shore up business and consumer activity. But the central bank and economic planners say they are sticking to plans that call for a return to normal policy.
Retail spending in June rose 12.1%. That was down from the 13.9% for the full quarter and well below the 33.9% surge in the January-March quarter.
“Domestic demand remained muted,” said Louis Kuijs of Oxford Economics in a report. Still, he said, growth should “gather pace” in the second half.
Factory output rose 8.3% in June over a year ago and was up 0.6% from the previous month.