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Production in China is slowing down as barriers produce production



Chinese factories slowed production growth in April, and retail sales fell significantly short of expectations as officials warned of new problems affecting the recovery of the world’s second-largest economy.

While Chinese exporters are in high demand, bottlenecks in the global supply chain and rising raw material costs are weighing on production, cooling the economic recovery bubble from last year̵

7;s decline in COVID-19. Read more

Factory production rose 9.8 percent in April from a year ago, according to forecasts, but at a slower pace than the 14.1 percent jump in March, according to data from the National Bureau of Statistics on Monday. Meanwhile, retail sales rose 17.7%, much lower than the forecast growth of 24.9% and a jump of 34.2% in March.

NBS spokesman Fu Linghui said that while the Chinese economy showed steady improvement in April, new problems were emerging, especially rising international commodity prices.

“The foundations for domestic economic recovery are still uncertain,” Fu said at a briefing in Beijing on Monday.

“For companies as a whole, price increases help improve corporate efficiency, but attention must be paid to the pressure on downstream industries,” he added.

Factory price inflation in China reached its highest rate since October 2017 in April. This may increase in the second and third quarters, according to a report by the central bank last week. Read more

The slower growth rates in April activity indicators are also due in part to fading base effects, as year-on-year comparisons have shifted from the very sharp declines seen when the coronavirus closed much of the country in early 2020.

In the factory sector, growth in motor vehicle production fell sharply to 6.8% from 69.8%, partly due to the main effect, as well as the critical shortage of semiconductors used in automotive systems.

Growth in cement production slowed in April and coal production declined during the year, although aluminum and crude steel production reached record highs, supported by strong demand. Read more

“China’s economy is showing signs of an unbalanced recovery: strong exports and domestic investment, on the one hand, but weak consumption, on the other,” said Zhiwei Zhang, chief economist at Pinpoint Asset Management.

The travel, entertainment and entertainment sectors are large employers and still hold back from the uncertainty of COVID-19, he said.

The growth of sales of household appliances fell particularly sharply in April compared to the previous month, falling from 38.9% in the year in March to 6.1%, according to NBS data.

Julian Evans-Pritchard, a senior Chinese economist at Capital Economics, said in a note that monthly retail sales growth had fallen well below its pre-pandemic rate.

“Looking ahead, we believe that the recovery in consumption must accelerate again in the coming months as the labor market continues to tighten,” he said.

TIME FOR RESAS?

China’s economy expanded by a record 18.3 percent in the first quarter, and many economists expect growth to exceed 8 percent this year.

Exports accelerated in April, thanks to strong demand for Chinese goods amid the rapid recovery of the US economy and the retention of factory production in other countries. Read more

However, April also saw a slowdown in factory activity amid supply bottlenecks and rising costs, and politicians acknowledged some of the recent weaknesses observed in the economic recovery. Read more

“Production costs have definitely increased, which has led to declining profits,” said the manager of a car accessories factory in the eastern Chinese province of Zhejiang, with the Xu family.

Sales are rising, but relatively slowly, and the factory plans to reduce production accordingly, he said.

A ruling decision-making body of the ruling Communist Party said last month that the country would encourage production and private investment to recover as soon as possible.

The Politburo meeting, chaired by President Xi Jinping, also warned that China’s economic recovery remains uneven and that its fundamentals are not yet stable.

Activity indicators on Monday also showed that investment in fixed assets increased by 19.9% ​​in the first four months compared to the same period a year earlier, slowing from a 25.6% increase from January to March.

The growth of real estate investments, sales of real estate by condominium area and the start of new construction by condominium areas cooled in the first four months compared to the first quarter, according to NBS data, against the background of increased control by politicians over financial activities of developers.

“For now, the government can stop tightening monetary policy and monitor the pace of recovery,” said Zhang of Pinpoint Asset Management.

Our standards: Thomson Reuters’ principles of trust.


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