Latest news with #KevinYao
Yahoo
14-07-2025
- Business
- Yahoo
China's economy set to slow in Q2 as pressure from US tariffs mounts
By Kevin Yao BEIJING (Reuters) -China's economy is likely to have cooled in the second quarter after a solid start to the year, as trade tensions and a prolonged property downturn drag on demand, raising pressure on policymakers to roll out additional stimulus to underpin growth. The world's No. 2 economy has so far avoided a sharp slowdown in part due to a fragile U.S.-China trade truce and policy support, but markets are bracing for a weaker second half as exports lose momentum, prices continue to fall, and consumer confidence remains low. Data due Tuesday is expected to show gross domestic product (GDP) grew 5.1% year-on-year in April–June, slowing from 5.4% in the first quarter, according to a Reuters poll. The projected pace would still exceed the 4.7% forecast in a Reuters poll in April and remains broadly in line with the official full-year target of around 5%. "While growth has been resilient year-to-date, we still expect it to soften in the second half of the year, due to the payback of front-loaded exports, ongoing negative deflationary feedback loop, and the impact of tariffs on direct exports to the U.S. and the global trade cycle," analysts at Morgan Stanley said in a note. "The third-quarter growth could slow to 4.5% or lower, while Q4 faces unfavourable base effect, putting the annual growth target at risk," the analysts said. They expect Beijing to introduce a 0.5–1 trillion yuan ($69.7 billion-$139.5 billion) supplementary budget from late in the third quarter. China's exports regained some momentum in June while imports rebounded, as factories rushed out shipments to capitalise on a fragile tariff truce between Beijing and Washington ahead of a looming August deadline. GDP data is due on Tuesday at 0200 GMT. Separate data on June activity is expected to show both industrial output and retail sales slowing. On a quarterly basis, the economy is forecast to have expanded 0.9% in the second quarter, slowing from 1.2% in January-March, the poll showed. China's 2025 GDP growth is forecast to cool to 4.6% - falling short of the official goal - from last year's 5.0% and ease even further to 4.2% in 2026, according to the poll. BALANCING ACT Investors are closely watching for signs of fresh stimulus at the upcoming Politburo meeting due in late July, which is likely to shape economic policy for the remainder of the year. Analysts polled by Reuters expect a 10-basis point cut in the seven-day reverse repo rate - the central bank's key policy rate - in the fourth quarter, along with a similar cut to the benchmark loan prime rate (LPR). Beijing has ramped up infrastructure spending and consumer subsidies, alongside steady monetary easing. In May, the central bank cut interest rates and injected liquidity as part of broader efforts to cushion the economy from U.S. President Donald Trump's trade tariffs. But China observers and analysts say stimulus alone may not be enough to tackle entrenched deflationary pressures, with producer prices in June falling at their fastest pace in nearly two years. Expectations are growing that China could accelerate supply-side reforms to curb excess industrial capacity and find new ways to boost domestic demand. It's a stiff challenge, analysts say, as Chinese leaders face a delicate balancing act in their quest to cut production while maintaining employment stability in the face of a worsening labour market outlook. ($1 = 7.1704 Chinese yuan renminbi) Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
11-07-2025
- Business
- Yahoo
China's GDP growth set to slow, raising pressure on policymakers: Reuters poll
By Kevin Yao BEIJING (Reuters) -China's economy is expected to have slowed down in the second quarter from a solid start to the year as trade tensions with the United States added to deflationary pressures, reinforcing expectations that Beijing may need to roll out more stimulus. The world's second-largest economy has so far avoided a sharp slowdown in part due to a fragile U.S.-China trade truce and policy stimulus, but markets are braced for a gloomier second half pressured by slowing exports, weak consumer demand, and a persistent property downturn. Gross domestic product growth in April-June is forecast at 5.1% year-on-year, cooling from 5.4% in the first quarter, a Reuters poll of 40 economists showed on Friday. The projected pace would still exceed the 4.7% growth forecast in a Reuters poll in April and remain broadly in line with the official full-year target of around 5%. Investors are closely watching for signs of fresh stimulus at the upcoming Politburo meeting due in late July, which is likely to shape economic policy for the remainder of the year. "We expect second-quarter GDP growth to exceed 5%, compared to 5.4% in the first quarter, indicating that there is no immediate need for additional stimulus," analysts at Societe Generale said in a note. GDP growth is projected to slow to 4.5% in the third quarter and 4.0% in the fourth, according to the poll, underscoring mounting economic headwinds as U.S. President Donald Trump's global trade war leaves Beijing with the tough task of getting households to spend more at a time of uncertainty. "We see a demand cliff in the second half, driven by multiple factors," said Ting Lu, chief China economist at Nomura, in a note. Lu cited slowing exports under U.S. tariffs, the fading boost from a consumer goods trade-in program, austerity measures, and a protracted property slump. "We believe Beijing will very likely rush to roll out a new round of supportive measures at some point during H2." For the whole of 2025, China's GDP growth is forecast to cool to 4.6% - falling short of the official goal - from last year's 5.0% and ease further to 4.2% in 2026, according to the poll. On a quarterly basis, the economy is forecast to have expanded 0.9% in the second quarter, slowing from 1.2% in January-March, the poll showed. The government is due to release second-quarter GDP data and June retail sales, industrial production and investment data at 0200 GMT on July 15. STIMULUS ALONE NOT ENOUGH Beijing has ramped up infrastructure spending and consumer subsidies, alongside steady monetary easing. In May, the central bank cut interest rates and injected liquidity as part of broader efforts to cushion the economy from Trump's trade tariffs. Analysts polled by Reuters expect the central bank to cut its key policy rate - the seven-day reverse repo rate - by 10 basis points in the fourth quarter, along with a similar cut to the benchmark loan prime rate (LPR). The central bank is also expected to lower the weighted average reserve requirement ratio (RRR) by 20 basis points during the same period. But China observers and analysts say stimulus alone may not be enough to address deflation, which deepened to its worst level in almost two years in June. China's GDP deflator - the broadest measure of prices across goods and services - is expected to decline further in the second quarter, marking a ninth consecutive quarterly drop, the longest streak since records began in 1993. Analysts polled by Reuters estimate a 0.1% rise in China's consumer prices for this year, well below the government's target of around 2%, before picking up 1.0% in 2026. Expectations are growing that China could accelerate supply-side reforms to curb excess industrial capacity and find new ways to boost domestic demand. Chinese government advisers are stepping up calls to make the household sector's contribution to broader economic growth a top priority at Beijing's upcoming five-year policy plan, as the trade tensions and deflation threaten the outlook. (Other stories from the Reuters global economic poll) : (Polling by Vijayalaksmi Srinivasan and Devayani Sathyan in BENGALURU and Jing Wang in SHANGHAI;Reporting by Kevin Yao)
Yahoo
07-07-2025
- Business
- Yahoo
Calls grow for China's household sector to be bigger economic driver
By Kevin Yao BEIJING (Reuters) -Chinese government advisers are stepping up calls to make the household sector's contribution to broader economic growth a top priority at Beijing's upcoming five-year policy plan, as trade tensions and deflation threaten the outlook. Leaders are gathering proposals for their 15th five-year plan, a voluminous document that lays out priorities up to 2030. The plan is expected to be endorsed at a December Communist Party conference and approved by parliament in March. Policy advisers told Reuters while they expect the document will elevate household consumption to a top goal in principle, it is likely to stop short of laying out an explicit target. Household consumption currently accounts for 40% of gross domestic product - some advisers propose China should aim for 50% over the next two five-year cycles. Economists have long urged Beijing to switch to a consumption-led economic model and rely less on debt-fuelled investment and exports for growth. While China has so far largely withstood pressures from higher U.S. tariffs, fresh worries about industrial overcapacity, factory deflation and the resulting stress on jobs and incomes have heightened calls for a shift in long-term strategy. "Relying on external demand makes us vulnerable to global shocks," a policy adviser said on condition of anonymity due to the topic's sensitivity. "We should strengthen domestic consumption as a key driver of growth and economic transformation," said the source, echoing calls from two other advisers Reuters spoke with. A fourth adviser said his proposals would not include this recommendation as "this is not something that can be easily achieved without the correct policies and reforms." NEW URGENCY Calls for a more robust consumer sector are not new. While Beijing has pledged structural changes for more than a decade, its household consumption share of GDP is roughly where it was in 2005 and far below the OECD average of 54%. The difficulty, analysts say, is that China has to shift resources from the business and government sectors to households in ways that could slow growth. Japan entered its decades-long stagnation period with a household share of GDP of 50% in 1991. That only grew to 58% by 2013, before dipping back to 55%. A 14th five-year plan progress report from 2023 lamented "insufficient mechanisms" to boost consumption. The policy proposals for the 15th plan are largely the same ones Beijing had promised before, the advisers said. These include bolstering welfare, relaxing an internal passport system blamed for deep urban-rural inequality, and other measures - including tax changes - to redistribute income towards those who have less and are more likely to spend it. New proposals include using state-owned assets to shore up pension funds and propping up the wobbly stock market and the crisis-hit property sector to increase households' investment earnings. "We have to increase household incomes, we have to boost transfers to low-income groups, but we've seen wage cuts," said a second adviser. He added household demand has taken on increased importance at the upcoming five-year plan with discussions focusing on whether China should set a specific consumption target. Yang Weimin, vice-chairman of the China Centre for International Economic Exchanges think-tank, said last month China should raise household consumption to over 50% of GDP by 2035. BALANCING ACT The advisers expect a goal from the 14th plan to keep the manufacturing share of GDP relatively stable will survive another five years. State-guided investment has turned manufacturing into a key growth engine. But an argument is emerging that investing more in an industrial complex that already accounts for a third of global manufacturing brings diminishing returns. A prominent Communist Party magazine last week called for a crackdown on price wars in various industries, in a nod to China's overcapacity and deflation. Peng Sen, chairman of the China Society of Economic Reform, said in comments posted on the WeChat account of the Changan Avenue Reading Club, an informal body backed by senior officials, that sluggish consumption also hurts manufacturing profits and endangers jobs. Peng said in March that China should boost final consumption, which includes household and government spending, as a share of GDP to 70% by 2035. The share stood at 56.6% in 2024. But not all of China's policy thinkers favour consumer-led growth. In a June article in financial outlet Yicai, government economist Yu Yongding said the concept was "theoretically incorrect" and incompatible with long-term development. "Without investment, there is no growth and without growth, sustained consumption is difficult to achieve," Yu wrote. As with the previous five-year plan, China is unlikely to set a specific GDP growth target for the next cycle, the advisers said. China targets growth of around 5% this year, the same goal as in 2024. But ambitions laid out in 2021 to double the size of the economy by 2035 remain, the advisers said. This, as in the past, might mean delaying painful reforms needed to rebalance the economy towards consumption, analysts say. "Growth during this period cannot be lower than 4%," said a third adviser. "We won't accept anything less."
Yahoo
07-07-2025
- Business
- Yahoo
Calls grow for China's household sector to be bigger economic driver
By Kevin Yao BEIJING (Reuters) -Chinese government advisers are stepping up calls to make the household sector's contribution to broader economic growth a top priority at Beijing's upcoming five-year policy plan, as trade tensions and deflation threaten the outlook. Leaders are gathering proposals for their 15th five-year plan, a voluminous document that lays out priorities up to 2030. The plan is expected to be endorsed at a December Communist Party conference and approved by parliament in March. Policy advisers told Reuters while they expect the document will elevate household consumption to a top goal in principle, it is likely to stop short of laying out an explicit target. Household consumption currently accounts for 40% of gross domestic product - some advisers propose China should aim for 50% over the next two five-year cycles. Economists have long urged Beijing to switch to a consumption-led economic model and rely less on debt-fuelled investment and exports for growth. While China has so far largely withstood pressures from higher U.S. tariffs, fresh worries about industrial overcapacity, factory deflation and the resulting stress on jobs and incomes have heightened calls for a shift in long-term strategy. "Relying on external demand makes us vulnerable to global shocks," a policy adviser said on condition of anonymity due to the topic's sensitivity. "We should strengthen domestic consumption as a key driver of growth and economic transformation," said the source, echoing calls from two other advisers Reuters spoke with. A fourth adviser said his proposals would not include this recommendation as "this is not something that can be easily achieved without the correct policies and reforms." NEW URGENCY Calls for a more robust consumer sector are not new. While Beijing has pledged structural changes for more than a decade, its household consumption share of GDP is roughly where it was in 2005 and far below the OECD average of 54%. The difficulty, analysts say, is that China has to shift resources from the business and government sectors to households in ways that could slow growth. Japan entered its decades-long stagnation period with a household share of GDP of 50% in 1991. That only grew to 58% by 2013, before dipping back to 55%. A 14th five-year plan progress report from 2023 lamented "insufficient mechanisms" to boost consumption. The policy proposals for the 15th plan are largely the same ones Beijing had promised before, the advisers said. These include bolstering welfare, relaxing an internal passport system blamed for deep urban-rural inequality, and other measures - including tax changes - to redistribute income towards those who have less and are more likely to spend it. New proposals include using state-owned assets to shore up pension funds and propping up the wobbly stock market and the crisis-hit property sector to increase households' investment earnings. "We have to increase household incomes, we have to boost transfers to low-income groups, but we've seen wage cuts," said a second adviser. He added household demand has taken on increased importance at the upcoming five-year plan with discussions focusing on whether China should set a specific consumption target. Yang Weimin, vice-chairman of the China Centre for International Economic Exchanges think-tank, said last month China should raise household consumption to over 50% of GDP by 2035. BALANCING ACT The advisers expect a goal from the 14th plan to keep the manufacturing share of GDP relatively stable will survive another five years. State-guided investment has turned manufacturing into a key growth engine. But an argument is emerging that investing more in an industrial complex that already accounts for a third of global manufacturing brings diminishing returns. A prominent Communist Party magazine last week called for a crackdown on price wars in various industries, in a nod to China's overcapacity and deflation. Peng Sen, chairman of the China Society of Economic Reform, said in comments posted on the WeChat account of the Changan Avenue Reading Club, an informal body backed by senior officials, that sluggish consumption also hurts manufacturing profits and endangers jobs. Peng said in March that China should boost final consumption, which includes household and government spending, as a share of GDP to 70% by 2035. The share stood at 56.6% in 2024. But not all of China's policy thinkers favour consumer-led growth. In a June article in financial outlet Yicai, government economist Yu Yongding said the concept was "theoretically incorrect" and incompatible with long-term development. "Without investment, there is no growth and without growth, sustained consumption is difficult to achieve," Yu wrote. As with the previous five-year plan, China is unlikely to set a specific GDP growth target for the next cycle, the advisers said. China targets growth of around 5% this year, the same goal as in 2024. But ambitions laid out in 2021 to double the size of the economy by 2035 remain, the advisers said. This, as in the past, might mean delaying painful reforms needed to rebalance the economy towards consumption, analysts say. "Growth during this period cannot be lower than 4%," said a third adviser. "We won't accept anything less." Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
07-07-2025
- Business
- Yahoo
Calls grow for China's household sector to be bigger economic driver
By Kevin Yao BEIJING (Reuters) -Chinese government advisers are stepping up calls to make the household sector's contribution to broader economic growth a top priority at Beijing's upcoming five-year policy plan, as trade tensions and deflation threaten the outlook. Leaders are gathering proposals for their 15th five-year plan, a voluminous document that lays out priorities up to 2030. The plan is expected to be endorsed at a December Communist Party conference and approved by parliament in March. Policy advisers told Reuters while they expect the document will elevate household consumption to a top goal in principle, it is likely to stop short of laying out an explicit target. Household consumption currently accounts for 40% of gross domestic product - some advisers propose China should aim for 50% over the next two five-year cycles. Economists have long urged Beijing to switch to a consumption-led economic model and rely less on debt-fuelled investment and exports for growth. While China has so far largely withstood pressures from higher U.S. tariffs, fresh worries about industrial overcapacity, factory deflation and the resulting stress on jobs and incomes have heightened calls for a shift in long-term strategy. "Relying on external demand makes us vulnerable to global shocks," a policy adviser said on condition of anonymity due to the topic's sensitivity. "We should strengthen domestic consumption as a key driver of growth and economic transformation," said the source, echoing calls from two other advisers Reuters spoke with. A fourth adviser said his proposals would not include this recommendation as "this is not something that can be easily achieved without the correct policies and reforms." NEW URGENCY Calls for a more robust consumer sector are not new. While Beijing has pledged structural changes for more than a decade, its household consumption share of GDP is roughly where it was in 2005 and far below the OECD average of 54%. The difficulty, analysts say, is that China has to shift resources from the business and government sectors to households in ways that could slow growth. Japan entered its decades-long stagnation period with a household share of GDP of 50% in 1991. That only grew to 58% by 2013, before dipping back to 55%. A 14th five-year plan progress report from 2023 lamented "insufficient mechanisms" to boost consumption. The policy proposals for the 15th plan are largely the same ones Beijing had promised before, the advisers said. These include bolstering welfare, relaxing an internal passport system blamed for deep urban-rural inequality, and other measures - including tax changes - to redistribute income towards those who have less and are more likely to spend it. New proposals include using state-owned assets to shore up pension funds and propping up the wobbly stock market and the crisis-hit property sector to increase households' investment earnings. "We have to increase household incomes, we have to boost transfers to low-income groups, but we've seen wage cuts," said a second adviser. He added household demand has taken on increased importance at the upcoming five-year plan with discussions focusing on whether China should set a specific consumption target. Yang Weimin, vice-chairman of the China Centre for International Economic Exchanges think-tank, said last month China should raise household consumption to over 50% of GDP by 2035. BALANCING ACT The advisers expect a goal from the 14th plan to keep the manufacturing share of GDP relatively stable will survive another five years. State-guided investment has turned manufacturing into a key growth engine. But an argument is emerging that investing more in an industrial complex that already accounts for a third of global manufacturing brings diminishing returns. A prominent Communist Party magazine last week called for a crackdown on price wars in various industries, in a nod to China's overcapacity and deflation. Peng Sen, chairman of the China Society of Economic Reform, said in comments posted on the WeChat account of the Changan Avenue Reading Club, an informal body backed by senior officials, that sluggish consumption also hurts manufacturing profits and endangers jobs. Peng said in March that China should boost final consumption, which includes household and government spending, as a share of GDP to 70% by 2035. The share stood at 56.6% in 2024. But not all of China's policy thinkers favour consumer-led growth. In a June article in financial outlet Yicai, government economist Yu Yongding said the concept was "theoretically incorrect" and incompatible with long-term development. "Without investment, there is no growth and without growth, sustained consumption is difficult to achieve," Yu wrote. As with the previous five-year plan, China is unlikely to set a specific GDP growth target for the next cycle, the advisers said. China targets growth of around 5% this year, the same goal as in 2024. But ambitions laid out in 2021 to double the size of the economy by 2035 remain, the advisers said. This, as in the past, might mean delaying painful reforms needed to rebalance the economy towards consumption, analysts say. "Growth during this period cannot be lower than 4%," said a third adviser. "We won't accept anything less." Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
