China’s central bank has made its biggest cut to interest rates since the start of the coronavirus pandemic as economic data pointed to industrial output, retail sales and property investment slowing down. As unemployment rose for the first time since February, the National Bureau of Statistics (NBS) said it would suspend publication of the youth unemployment rate which has been more than 20 per cent in recent months.
The People’s Bank of China (PBOC) trimmed its rate on one-year loans by 15 basis points to 2.5 per cent, its second cut since June and the biggest since April 2020. It also cut the seven-day repo rate by 10 basis points to 1.8 per cent.
Data published on Tuesday showed that retail sales in China grew by 2.5 per cent in July compared with a year earlier, down from a 3.1 per cent year-on-year increase in June. It was the slowest rate of increase since December 2022, immediately after the Chinese authorities lifted zero-Covid restrictions.
Industrial output grew 3.7 per cent compared to July 2022, down from June’s figure of 4.4 per cent. Investment in the property sector, which has long been a major driver of China’s economy, fell 8.5 per cent year-on-year in the period from January to July this year.
Country Garden, one of China’s biggest property developers, suspended trading in 11 of its onshore bonds on Monday amid speculation that it could default on its debts. NBS spokesman Fu Linghui acknowledged the difficulties faced by the property sector.
“The property market is now experiencing an adjustment period and it is going to be challenging for [property business] to operate in the short term. This is especially true for those leading property enterprises, where debt risks have become apparent and affected market expectations,” he said.
“But we should see that these problems are only interim, and as policies on the property market are adjusted, the risks will be defused.”
Tuesday’s data reinforced fears about the weakness of China’s post-Covid economic recovery following last week’s reported fall in consumer and producer prices. The Chinese authorities have dismissed suggestions that the economy is entering a period of deflation, a position echoed by Mr Fu on Tuesday.
“There is no deflation in the Chinese economy, and there will be no deflation in the future,” he said.
The decision to halt publication of youth unemployment figures is the latest in a series of government actions to limit access to economic data. But Mr Fu said that with more students pursuing advanced degrees, it was time to review a methodology which counts as unemployed many people who would not be classified as jobless in the European Union or the United States.
“The main task for students is studying. There are different views over whether to include students who are looking for a job before graduation in the labour-force survey and statistics,” he said.
