Beijing’s State Council this week pledged to “expand domestic demand as the strategic bedrock … and better leverage consumption’s foundational role in economic development”.
But Trivium China, an economic analysis firm, warned that policymakers in Beijing were too focused on measures that assumed demand was lurking just below the surface, with officials attempting to stimulate consumption by boosting welfare, subsidising spending, and encouraging companies to create new products.
“Beijing is doubling down on its failed approach to consumption. Until the material well-being of Chinese households improves, no amount of product innovation will loosen their wallets,” the firm said.
The bright spot for China was exports and factory output. Industrial production rose 5.3pc in the year to June, picking up speed from previous months.
But businesses’ capital investment dived 5.7pc in the first half of the year.
Jian Chang, an analyst at Barclays, said the numbers “continued to paint a picture of a K-shaped recovery”, meaning that different parts of the economy were heading in different directions.
“Traditional industries (construction, low-tech and labour-intensive manufacturing sectors) lagged behind the new and high-tech industries, which include renewable energy, industrial robotics, semiconductors, AI and advanced manufacturing,” she said.
Ms Chang said the authorities were still rolling out some stimulus funds from earlier in the year. But they might have to do even more in the autumn if it looks like Beijing will miss its growth target.
