China's economy lags in July amid tariff pressure, weak property market

China's economy showed signs of slowing in July as factory output and retail sales slowed and housing prices dropped further, according to data released Friday.

Uncertainty over tariffs on exports to the United States is still looming over the world's second-largest economy after President Donald Trump extended a pause in sharp hikes in import duties for 90 days, beginning Monday, following a 90-day pause that began in May.

As officials worked toward a broader trade agreement, China reported earlier that its exports surged 7.2 per cent in July year-on-year, while its imports grew at the fastest pace in a year, as businesses rushed to take advantage of the truce in Trump's trade war with Beijing.

 

But that also reflected a lower base for comparison, and manufacturers have slowed investments, hiring and production as they watch to see what comes. Chinese manufacturers also have ramped up shipments to Southeast Asia, Africa and other regions to help offset lost business in the US.

Still, annual growth in industrial output fell to 5.7 per cent in July from 6.8 per cent in June, the National Bureau of Statistics said.

Investments in factory equipment and other fixed assets rose a meager 1.6 per cent in January-July, compared with 2.8 per cent growth in the first half of the year.

Property investments plunged 12 per cent in the first seven months of the year, with residential housing investment dropping nearly 11 per cent.

Prices for newly built housing in major cities fell 1.1 per cent, as a prolonged downturn in the property industry lingered.

The meltdown in the housing market hit just as the COVID-19 pandemic began, sapping one of the economy's main drivers of growth and causing dozens of developers to default on their debts.

The crisis rippled throughout the economy, destroying jobs for millions of people.

The government has sought to ensure that most housing that was paid for gets built, but sales remain weak despite a series of moves meant to entice families into back into the market.

Since most Chinese families have their wealth tied up in property, the anemic housing market has been a major factor crimping consumer spending. In July, retail sales rose 3.7 per cent, the slowest rate in seven months and down from a 4.8 per cent increase in June.

The unemployment rate rose to 5.2 per cent from 5 per cent as university graduates began looking for work.

While consumer prices rose 0.4 per cent in July from the month before, prices at the wholesale level slipped 3.6 per cent from a year earlier in another indicator of relatively weak demand.