China property drag, other data show recovery remains weak

Latest figures suggest need for more govt action to achieve growth target, analysts say

China’s housing slump deepened in May and triggered new calls for the government to pump cash and credit into the economy, while industrial output – which has kept growth on track – fell short of forecasts. 

Among the slew of data published on June 17, analysts latched onto the bad news from the property market, which has been the biggest drag on China’s economic growth. Declines in real estate investment and home prices both gathered pace in May.

Industrial production rose 5.6 per cent from a year earlier, the National Bureau of Statistics said, slowing from April and missing the median forecast in a Bloomberg survey. Retail sales offered some encouragement, picking up more than expected, but Chinese shoppers remain far from recovering their pre-pandemic mojo. 

The numbers add up to a still-weak recovery, most economists said – likely requiring more action from Beijing to bolster consumer demand and tackle imbalances, if 2024’s 5 per cent growth target is to be met. That could take the form of stepped-up government spending and heightened efforts by the central bank to put a floor under housing markets and get credit flowing.

“The most disappointing thing in May’s data is probably that property sales barely saw any improvements even after so many supportive measures,” said BNP Paribas chief China economist Jacqueline Rong. She said China’s authorities need to find ways to lower the rates on existing mortgages, closing the gap with the cost of new ones.