Economic growth in China was surprisingly weak in the second quarter, a sign the country’s recovery from Covid-19 lockdowns is losing momentum.
Gross domestic product increased just 0.8% in the second quarter, compared with a 2.2% expansion in the first three months of the year. Retail sales and exports dragged down growth.
The figures could be taken as either a good sign or a bad sign for Chinese stocks. On the one hand, they show the world’s second biggest economy is struggling. On the other, they put pressure on the government to step up stimulus programs to get the country back on track. Authorities are aiming for 5% annual expansion in 2023 after badly missing their goal last year.
The Hang Seng Index traded 0.3% higher on Monday.
Baidu
(BIDU) was trading down 0.3% in Hong Kong. Retailer
Alibaba
(BABA) was up 0.2%, while
JD.com
(JD) slipped 0.1%.
Meituan
(MPNGY) fell 1.6%.
China’s sluggish expansion is weighing on expectations for energy demand. Brent crude, the international oil standard, fell 1% to $79 a barrel. West Texas Intermediate, the U.S. benchmark, slipped 1.1% to $74.57 a barrel.
The biggest question for investors is how China’s government responds—so far it has been reluctant to undertake large-scale stimulus.
Inflation isn’t a problem in the country, which could give the central bank room to cut interest rates. Or the government could try more direct measures, such as handouts to low-income households, tax cuts or spending on social programs. The goal would be to increase consumption and investment.
Write to Brian Swint at [email protected]
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