In a clear indication of the ongoing struggles within China's economy during the post-pandemic recovery phase, recent data from the National Bureau of Statistics (NBS) revealed that the nation's industrial output saw an annual growth of only 4.5% in August. This marks a decrease from the 5.1% growth rate recorded in July, establishing it as the slowest growth since March of this year. The beleaguered property markets in China, characterized by plunging real estate values and a corresponding decline in consumer demand, have continued to create significant headwinds for overall economic performance and industrial sector output in 2024.
In a month-over-month comparison, the industrial output experienced a marginal increase of just 0.32% in August compared to July. When observing the first eight months of 2023 collectively, the industrial output still managed to show a year-to-date increase of 5.8%, according to the NBS report. Analysts from ING Think pointed out that the struggles of China's real estate markets are significantly undermining the industrial sector.
They noted the clear repercussions of the property market contraction on industrial production levels. For instance, steel production plummeted by 6.5% year-over-year, illustrating the sharp decline in demand for steel across the nation. This diminished demand aligns with various other data trends indicating a downturn in related industries.
Similarly, the cement industry reported an alarming year-over-year decline of 11.9% in output during August, reflecting pressing challenges in construction and infrastructure investment, as highlighted by ING Think, a division of the prominent Dutch investment house. Despite the downturn in basic industries, several other sectors managed to show signs of growth.
Notably, the production of semiconductors surged by a remarkable 17.8% year-on-year in August. Sectors relevant to computers, communications, and electric equipment also showcased robust performance, expanding by 11.3%. Similarly, the transportation sector, particularly in rail, ships, and airplanes, experienced a growth rate of 12.0% during the same month. Furthermore, the output for new-energy vehicles, particularly electric vehicles (EVs), demonstrated a significant year-on-year increase of 30.5% in August.
The production of service robots also saw an impressive growth of 20.1%, according to NBS figures. A representative from NBS remarked that China's industrial output witnessed expansion in August, despite the challenges posed by internal natural disasters and external uncertainties, as covered by the Global Times, a state-run media entity. In a related development, local and state governments in China issued bonds at an accelerated pace in August, aimed at financing major infrastructure projects.
This surge in bond issuance, along with specific policy initiatives, is anticipated to bolster investment growth and support economic expansion. Additionally, fixed-asset investment during the January through August period showed a modest rise of 3.4% compared to the same timeframe in 2023, as reported by the NBS.
Looking forward, Beijing has set an ambitious target of 5% growth for the nation’s gross domestic product (GDP) in 2024. However, it appears there could be challenges in meeting this goal unless further stimulus measures or monetary easing are enacted, as suggested by ING Think analysts. They stated, “Additional policy support will be necessary to achieve the 5% growth target this year.
Monthly economic momentum has decelerated in recent months, and the pressure of a less supportive base effect means achieving this year’s 5% growth target will be quite challenging without significant policy adjustments ahead.”.