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| Growth in the Chinese economy. |
China's GDP grew by 6.3% year-on-year in the second quarter, and the two-year compound growth rate was 3.3%, which was close to the author's previous forecast. Judging from the economic data in June alone, the economy is coming out of the short-term bottom of the "N-shaped recovery after the epidemic". Among them, the two-year compound growth rate of social zero, fixed investment, industrial growth and service industry production index has picked up. Exports and household consumption in the second half of the year will be the main factors driving the recovery.
Highlights of The Economic Recovery This Quarter Include:
Highlight 1: The Three Types of Consumption Continue To Improve
In June, the two-year compound growth rate ended the downward trend since March, up 0.5 percentage points from May to 3.1%. Among them, the three types of consumption continued to improve, supporting the rebound in social zero growth. De-realized car consumption.
Domestic automobile consumption, especially the sales of new energy vehicles, continued to maintain high growth. The two-year compound growth rate of passenger car retail sales in the narrow sense under the caliber of the Passenger Federation was 9.3%, compared with the previous value of 3.4%. Among them, the two-year compound growth rate of new energy vehicles reached 70.2%.
Highlights of The Economic Recovery This Quarter Include:
Highlight 1: The Three Types of Consumption Continue To Improve
In June, the two-year compound growth rate ended the downward trend since March, up 0.5 percentage points from May to 3.1%. Among them, the three types of consumption continued to improve, supporting the rebound in social zero growth. De-realized car consumption.
Domestic automobile consumption, especially the sales of new energy vehicles, continued to maintain high growth. The two-year compound growth rate of passenger car retail sales in the narrow sense under the caliber of the Passenger Federation was 9.3%, compared with the previous value of 3.4%. Among them, the two-year compound growth rate of new energy vehicles reached 70.2%.
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| Growth in Automobile sector in China. |
Continuously repaired travel consumption. Since the beginning of the year, the travel data of residents has continued to recover, and the domestic passenger turnover in recent months has exceeded the level of the same period from 2020 to 2022. High-frequency data show that the number of domestic flights executed from June to July this year has risen to be close to the level of the same period in 2021. In June, consumption related to travel, such as catering and cosmetics, maintained a two-year compound growth rate of 5.6% and 9%.
Maintain high-end consumption with high growth. After the consumption scene is liberalized, the consumption expectations of high-income groups with more excess savings will improve, driving the high growth of high-end consumption. For example, the growth rate of sales of luxury cars worth more than 300,000 yuan is significantly higher than that of ordinary models, and the average occupancy rate of five-star hotels is also higher than that of star-rated hotels.
Highlight 2: Improvement In Per Capita Disposable Income of Residents
There are structural problems in employment, especially the youth unemployment rate was 21.3% in June, a record high since the data was recorded. However, the young working population only accounts for 7.6% of the total working population. What really affects residents' income and spending power is the employment situation of the labor force aged 25 to 59. The surveyed unemployment rate in this part was 4.1% in June, a record low since 2018. The overall urban surveyed unemployment rate was 5.2%, unchanged from May, and lower than the policy unemployment rate target of 5.5%.
Only when employment is stabilized can residents' income and consumption continue to improve. In the second quarter, the per capita disposable income of domestic residents increased by 8.4% year-on-year (a two-year compound growth rate of 5.5%), and wage income increased by 9.2% year-on-year (a two-year compound growth rate of 5.7%). At the same time, the growth rate of real income of residents has also exceeded the growth rate of GDP at constant prices.
Residents' willingness to consume is also picking up along with real disposable income. The average propensity to consume (consumption expenditure/disposable income) of residents rose to 68% in the second quarter. Although it is still lower than the average level of 71% from 2015 to 2019, the gap is narrowing significantly. According to the survey data of the People's Bank of China in the second quarter, the proportion of "more consumption" among residents rose from 23.2% to 24.5%.
Highlight 3: High Growth In Investment In Power and New Infrastructure
In June, infrastructure investment increased by 10.7% year-on-year, which was 0.9 percentage points higher than that at the end of April. Among them, the hydropower and heat industry increased by 27% year-on-year, and the investment in new integrated infrastructure such as the industrial Internet and smart transportation increased by 34.1%, which is an important support for the recovery of infrastructure investment.
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| China observes growth in power and infrastructure. |
Since 2022, the growth rate of investment in the hydropower and thermal power industry has continued to be higher than the growth rate of infrastructure investment, especially the new power infrastructure represented by UHV and charging piles is at the peak of construction. In July this year, the second meeting of the Central Committee for Deep Reform reviewed and approved three reform documents related to energy and electricity—"Opinions on Promoting Dual Controls of Energy Consumption and Gradually Shifting to Dual Controls of Carbon Emissions", "Implementation Opinions on Further Deepening the Reform of the Oil and Natural Gas Market System to Improve National Oil and Gas Safety Guarantee Capabilities", and "Guiding Opinions on Deepening the Reform of the Electric Power System and Accelerating the Construction of a New Power System". The National Development and Reform Commission also mentioned the need to moderately advance the construction of charging infrastructure.
Changes in the structure of infrastructure investment also explain the divergence between the performance of high-frequency data such as cement and petroleum asphalt and the growth rate of infrastructure investment since the beginning of the year. Construction materials such as cement and petroleum asphalt are generally used in the construction of traditional infrastructure such as road transportation. This year, the year-on-year growth rate of investment in the road transportation industry has fluctuated from 5.9% at the beginning of the year to 3.1% in June, which is a drag on high-frequency data such as cement and asphalt.
Highlight 4: Manufacturing Investment Stopped Falling
In June, manufacturing investment increased by 6% year-on-year, the same as the growth rate in May, ending the downward trend since September last year. Judging from the published industry data, the growth rate of manufacturing investment in June picked up compared to May mainly in food manufacturing, textile industry, automobile manufacturing, railway, ship and other transportation equipment manufacturing, non-ferrous metal smelting and rolling processing industries and other industries.
On the one hand, after the accelerated destocking in April-May, the high-frequency data in June showed that the destocking speed of some industries has begun to slow down, especially the inventory level of some downstream industries such as textile and nonferrous metals is already at a low level. On the other hand, the demand of some downstream industries is not weak. For example, the retail sales of grain, oil and food, which represent rigid consumption, increased by 5.4% year-on-year in June, and the retail sales of clothing, shoes, hats, needles and textiles, which represent travel consumption, rose by 6.9% year-on-year in June, both higher than the 1.4% growth rate of commodity retail sales. In June, the added value of the automobile manufacturing industry increased by 8.8% year-on-year, and automobile sales and output continued to remain high. In June, fixed asset investment in the railway transportation industry grew by 20.5%, driving high growth in railway equipment manufacturing.
Changes in the structure of infrastructure investment also explain the divergence between the performance of high-frequency data such as cement and petroleum asphalt and the growth rate of infrastructure investment since the beginning of the year. Construction materials such as cement and petroleum asphalt are generally used in the construction of traditional infrastructure such as road transportation. This year, the year-on-year growth rate of investment in the road transportation industry has fluctuated from 5.9% at the beginning of the year to 3.1% in June, which is a drag on high-frequency data such as cement and asphalt.
Highlight 4: Manufacturing Investment Stopped Falling
In June, manufacturing investment increased by 6% year-on-year, the same as the growth rate in May, ending the downward trend since September last year. Judging from the published industry data, the growth rate of manufacturing investment in June picked up compared to May mainly in food manufacturing, textile industry, automobile manufacturing, railway, ship and other transportation equipment manufacturing, non-ferrous metal smelting and rolling processing industries and other industries.
On the one hand, after the accelerated destocking in April-May, the high-frequency data in June showed that the destocking speed of some industries has begun to slow down, especially the inventory level of some downstream industries such as textile and nonferrous metals is already at a low level. On the other hand, the demand of some downstream industries is not weak. For example, the retail sales of grain, oil and food, which represent rigid consumption, increased by 5.4% year-on-year in June, and the retail sales of clothing, shoes, hats, needles and textiles, which represent travel consumption, rose by 6.9% year-on-year in June, both higher than the 1.4% growth rate of commodity retail sales. In June, the added value of the automobile manufacturing industry increased by 8.8% year-on-year, and automobile sales and output continued to remain high. In June, fixed asset investment in the railway transportation industry grew by 20.5%, driving high growth in railway equipment manufacturing.
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