China Second Quarter Data Underlines Direction

China, Company Strategy, Economics

ChinaRetailsalesLabour

By John Richardson

ECONOMIC rebalancing in China isn’t working yet as this excellent article from The Wall Street Journal – summarising China’s second quarter economic data – describes.

“Consumption as a share has fallen to 45.2%, down from 60.4% in the first half of 2012. The share of investment has risen to 53.9% from 51.2% over the same period,” writes the newspaper.

One of the reasons for the surge in investment is the failure to pop the property-market bubble.

“In the real estate sector, it wasn’t so long ago that China’s leaders were promising a crackdown on bubbly prices,” adds the WSJ.

“Now nationwide sales by floor space are up 30.4% year-on-year and prices in Guangzhou are clocking 15.3% increases with other major cities not far behind.

“That takes home ownership further out of reach for first-time buyers. But it’s also driven a return to growth in real estate construction – which edged up to 2.9% in the first half, a turnaround from contraction in 2012.”

Another reason is that local investment has increased, thanks to the building of more luxury villas for corrupt politicians and unneeded bridges, airports, roads and other infrastructure.

A third factor behind the failure to rebalance is disappointing growth in retail sales, partly thanks to the crackdown on more conspicuous displays of corruption, such as fine dining, writes the WSJ.

A slowdown in urban income growth, to 6.5% in the first half from 9.6% last year, also seems likely to be a factor in the poor retail sales figures. The Financial Times says the weak income growth is the result of slightly softer demand for white-collar workers, underlining the point we made last week.

There is only one valid interpretation that can be made from this data: China has no choice but to press the foot much harder on the restructuring peddle in order to replace is failed economic growth model and to create a more decent, equitable society for its increasingly annoyed citizens.

It has political breathing space to do so because, to date, despite the weaker income growth amongst the urban middle class, overall employment markets remain tight.

“In the second quarter there were 6.1m jobs available to 5.7m job seekers – 1.07 posts for every person seeking work, down just a touch from the first quarter,” writes The Financial Times.

This is the complete reversal  of 2008, when the global financial crisis resulted in some 20m job losses in China.

PREVIOUS POST

Running Away From Complexity

14/07/2013

  By John Richardson TWO-and-half years ago, the blog was told of a struggl...

Learn more
NEXT POST

3D Printing: The New Industrial Revolution

17/07/2013

By John Richardson MANUFACTURING via 3D printing could result in an industrial r...

Learn more
More posts
Why a hard look at the data show China has not seen a V-shaped recovery
06/08/2020

          Note: All the data comparisons below are year-on-year By John Ric...

Read
China moves closer to Iran as tensions with the US build: Implications for petrochemicals
02/08/2020

By John Richardson Opinions and emotions and can shape how we interpret data, but, as we all know, o...

Read
China polyolefins market H1 review: so far so good, but beware of the risks ahead
30/07/2020

By John Richardson ALL looks fine in the polyolefins world. The Old Normal appears to have reasserte...

Read
Polyethylene market recovery could be threatened by slower China crude buying, weaker economic growth
28/07/2020

By John Richardson EVEN by China’s standards, where just about every number is eye-wateringly larg...

Read
Why the polypropylene industry must switch from volumes to value
26/07/2020

By John Richardson EVERYONE knows about the oversupply in the polyethylene (PE) market as it has bee...

Read
China consulate closure underlines long-term split with US, potential big shift in petchems trade flows
23/07/2020

The views in this blog post are, as always, my personal views and do not reflect the views of ICIS. ...

Read
China’s real GDP could have been negative in Q2: What this may mean for PP
22/07/2020

By John Richardson CHINA’S official GDP growth of 3.2% for Q2, which was announced last week, may ...

Read
Iran and China new deal could hasten Belt & Road Initiative petrochemicals self-sufficiency
19/07/2020

By John Richardson ONCE AGAIN, please don’t say I didn’t tell you. A proposed new investment and...

Read

Market Intelligence

ICIS provides market intelligence that help businesses in the energy, petrochemical and fertilizer industries.

Learn more

Analytics

Across the globe, ICIS consultants provide detailed analysis and forecasting for the petrochemical, energy and fertilizer markets.

Learn more

Specialist Services

Find out more about how our specialist consulting services, events, conferences and training courses can help your teams.

Learn more

ICIS Insight

From our news service to our thought-leadership content, ICIS experts bring you the latest news and insight, when you need it.

Learn more