Beijing:
China's economic growth will soften this year due to summer flooding and anti-coronavirus controls, an official said Monday, after consumer sales and other activity weakened in July.
China's economy still is in a "recovery trend" from last year's pandemic-induced slowdown but is likely to weaken after a relatively strong first half, said Fu Linghui, a spokesman for the National Bureau of Statistics.
"This year's main economic growth trend will be low after high," Fu said at a news conference.
Fu gave no growth forecast. Private sector forecasters say the world's second-largest economy easily should achieve 8 per cent over last year's depressed level.
Growth in July retail sales softened to 8.5 per cent over a year earlier, below the consensus forecast of 10.9 per cent and down from the previous month's 12.1 per cent. Factory output grew 6.4 per cent, below the forecast of 7.9 per cent.
"Growth momentum weakened sharply," said Louis Kuijs of Oxford Economics in a report.
The economy was disrupted by unusually severe summer flooding that hit central China in July, killing more than 300 people in Henan province. More floods hit Hubei province to the south this month, killing at least 21 people.
investors are confused whether the government in the second largest economy has decided to change the rules of the game.
China's months-long regulatory crackdown has included big names in e-commerce, the gig economy, exam cramming and most recently online insurance. Close to $1 trillion in market value has been wiped off China Inc since February.
For big firms that also list on markets like Wall Street because it brings in international investment, 2021 is already the worst year since the global financial crisis.It could spring back of course, but there's the rub. Many analysts are convinced things will settle, but only the Beijing ruling elite know if and when that might be. "Investors have been jolted," said Paul O'Connor, head of multi-asset at Janus Henderson.
"This will weigh heavily on the outlook for profits, valuations and investor sentiment in China." But by how much?
Morgan Stanley estimates MSCI China, which has seen one of its biggest lags on record versus world stocks this year, now trades at 13.9 times 12-month forward price-to-earnings, a 5% premium over MSCI's broader emerging market benchmark. That compares to about 17 times at the start of the year. It could get down to 13 times, says Morgan Stanley.
Meanwhile, authorities have reimposed some travel and business controls to fight outbreaks of the coronavirus's more contagious delta variant that began in late July. Some airline flights and train service have been canceled, most access to a city of 1.5 million cut off and mass virus testing ordered in some areas.
"Given China's zero tolerance' approach to Covid, future outbreaks will continue to pose significant risk to the outlook," said Kuijs.
The government reported earlier that economic growth slowed to a still-strong 7.9 per cent over a year earlier in the three months ending in June, down from the previous quarter's 18.3 per cent. Those figures were amplified by comparison with early 2020, when the economy was shut down to fight the virus.
Output in the second quarter compared with the January-March period, the way other major economies are measured, was 1.3 per cent, up from the previous quarter's 0.6 per cent over late 2020.
Fu, the statistics official, expressed confidence the long-term outlook was still healthy.
"The economy will still maintain a stable recovery," Fu said. "The quality of development will continue to improve."