Chinese economy is recovering, but real estate crisis is ‎worsening

The Chinese economy showed surprising resilience in August, with faster-than-expected growth in factory production and retail sales boosting the recovery from the effects of the Covid-19 pandemic and heat waves in the country, but the growing real estate stagnation weighed on the economic outlook.

According to “Reuters”, the better-than-expected numbers show that the world’s second-largest economy is gaining some momentum, after it narrowly escaped the downturn in the quarter ending in June and raised the prospects of recovery slightly for the rest of the year.

The National Bureau of Statistics reported that industrial output grew 4.2 % in August from a year earlier, the fastest pace since March. That beat analysts’ expectations in a Reuters poll for a 3.8% increase and outpaced a 3.8% rise in July.

Retail sales rose 5.4% from a year ago, the fastest pace in six months, and also exceeded expectations for 3.5 percent growth and the 2.7% increase recorded in July.

In comments following the release of the data, National Bureau of Statistics spokesman Fu Linghui said China’s economic improvement in August was “hard-earned” thanks to supportive policies, but cautioned that the recovery was fragile and global conditions remained complex. ‎

In contrast to the strong activity data, the Chinese real estate sector contracted further in August as losses in home prices, investments and sales continued.

Real estate investments fell last month by 13.8%, the fastest pace since December 2021, according to Reuters calculations based on official data.

New home prices fell 1.3% year-on-year in August, the fastest pace since August 2015, after falling 0.9% the previous month.