Due to floods caused by climate change and a new outbreak of coronavirus in China, the economic recovery has stalled and is slower than expected. The forecast of GDP growth of 6.8 percent in the third quarter may not come true, said Bloomberg.
Growth in manufacturing and retail sales has slowed. According to the National Bureau of Statistics (NBS), cited by Reuters, production rose 6.4 percent year-over-year in July and retail sales rose 8.5 percent, falling short of analysts’ expectations.
China is battling the worst outbreak of coronavirus since the first cases in 2020. Renewed efforts to combat coronavirus are limiting consumption growth and slowing exports. Also, due to the floods and environmental ambitions, the Chinese industry has faced severe shocks.
Industrial production in the world’s second-largest economy rose 6.4 percent year-on-year in July, according to NBS data. Analysts had expected output to rise 7.8 percent after rising 8.3 percent in June. Retail sales rose 8.5 percent in July, well below forecasts for growth of 11.5 percent.
Due to deteriorating demand in late July and rising employment concerns, China’s growth rate is expected to slow more sharply from the beginning of 2021. A forecast of 6.8 percent GDP growth in the third quarter, according to Bloomberg, may not materialize.
Real estate investment, the most important driver of China’s recovery, grew just 12.7 percent in January-July, compared with a growth of 15 percent in the first half of 2021.
China’s recovery has been uneven due to coronavirus outbreaks and floods. China’s economy has returned to its pre-pandemic growth rate. However, it is slowing down as businesses face high costs and supply chain disruptions. The outbreak at the port of Ningbo-Zhoushan has halted all inbound and outbound container traffic at one terminal, limiting about 25 percent of the capacity of China’s second-largest port indefinitely. These disruptions could undermine not only China’s exports and economy, but also have a domino effect on imports in other countries within weeks.