China continues to struggle with shift to new economic model, statistics show

12 Aug 16

China’s economy is still struggling with the pains of transformation, according to data published today.

The country had hoped for better performance in both industry and retail this month, with growth in both sectors for July falling short of forecasts.

The figures, published by China’s National Bureau of Statistics, show growth in retail sales was also weaker than in June, at 10.2% compared to 10.6%.

Beijing has been trying to rebalance China’s economy away from manufacturing and towards a more sustainable, services-based model, widely regarded as an essential transition.

However, as the economy adapts, the aches and pains of change are stinging both in China and beyond and the implications of the necessary slowdown are spreading worldwide.

As a result, China dropped behind India as the world’s fastest growing major economy earlier this year.

Today’s figures, along with some gloomy trade data published earlier this week, dashed hopes that had been raised after it looked like growth had improved slightly in the second quarter.

A statement from the statistics bureau blamed floods, high temperatures and weak demand both at home and abroad for the worse-than-expected performance.

It said: “However, overall economic development kept performing in a proper range with steady pace, as a result of stable employment and prices, deepened reform and accumulated new impetus.”

Earlier this year, International Monetary Fund chief Christine Lagarde, said it was to be expected that, like any major transition, the path to a new economy for China will “at times be bumpy”.

“A delicate balance needs to be struck between shifting to a relatively slower but more sustainable pace of growth, and advancing much-needed reforms,” she said.

The fund will release its latest annual health check on the Chinese economy later on today. 

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