China's Frail Q2 GDP Growth Raises The Urgency For More Policy Support  

• China's economy grew at a frail pace in the second quarter as demand weakened at home and abroad, with the post-COVID momentum faltering rapidly and raising pressure on policymakers to deliver more stimulus to shore up activity.
• Chinese authorities face a daunting task in trying to keep the economic recovery on track and putting a lid on unemployment, as any aggressive stimulus could fuel debt risks and structural distortions.
• The gross domestic product grew just 0.8% in April-June from the previous quarter, on a seasonally adjusted basis, data released by the National Bureau of Statistics showed on Monday, versus analysts' expectations in a Reuters poll for a 0.5% increase and compared with a 2.2% expansion in the first quarter.
• On a year-on-year basis, GDP expanded 6.3% in the second quarter, accelerating from 4.5% in the first three months of the year, but the rate was well below the forecast for growth of 7.3%. The annual pace was the quickest since the second quarter of 2021, although it was heavily skewed by economic pains caused by stringent COVID-19 lockdowns in Shanghai and other major cities last year.
• "The data suggests that China's post-COVID boom is clearly over," said Carol Kong, an economist at the Commonwealth Bank of Australia in Sydney. "The higher-frequency indicators are up from May's numbers, but still paint a picture of a bleak and faltering recovery and at the same time youth unemployment is hitting record highs." The latest data raises the risk of China missing its modest 5% growth target for 2023, some economists say.
• More timely June data, which was released alongside the GDP numbers, showed China's retail sales grew 3.1%, slowing sharply from a 12.7% jump in May. Analysts had expected growth of 3.2%. Industrial output growth unexpectedly quickened to 4.4% last month from 3.5% seen in May, but demand remains lukewarm.

(Source: Reuters)