China's Q2 GDP Miss Stirs Unease: Alibaba, BYD, Other Stocks In Focus As Analysts Point To Consumer Slowdown

The Chinese economy grew less than expected in the second quarter, underlining the shaky recovery seen since the reopening in late-2022.

Q2 Growth Comes In Light: China's GDP rose 6.3% year-over-year in the second quarter, faster than the 4.5% rate seen in the first quarter, preliminary estimates released by the National Bureau of Statistics, China, showed.

The growth rate, however, trailed the 7.3% increase estimated by economists, according to Reuters.

On a quarter-over-quarter basis, GDP rose 0.8%, also trailing expectations of 2.2% growth.

Crunching The Numbers: Agricultural production rose 3.3% year-over-year in the first half of 2023 and industrial output growth accelerated from 3% in the first quarter to 3.8% in the first half of the year. The service sector growth also accelerated from 5.4% in the first quarter to 6.4% in the first half of the year.

Retail sales were up 8.2% in the first half of the year and fixed asset investment rose 3.8%. Property investment, which accounts for about one-third of total investment, fell by 7.9%, the South China Morning Post reported.

NBS data showed that Imports fell 0.1%, while exports climbed 3.7% and the trade balance was a surplus of 2.82 trillion yuan ($393.2 billion).

Producer prices showed deflation in the first half of the year, while prices at the consumer level rose 0.7% year-over-year.

“In the first half year, as the economic and social development has fully returned to normal and macro policies have manifested effects, the national economy showed a good momentum of recovery with high-quality development advancing steadily,” NBS said.

The most recent data points show further slackening. The total value of exports and imports fell 6% in June, with exports plunging 8.3% and imports declining by a more modest 2.6%. The annual retail sales growth also slowed to 3.1% in June. The unemployment rate in urban areas was 5.2% in June. The jobless rate for the 16-24 age group hit a new high of 21.3% in June, up from 20.8% in May, SCMP said.

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Consumption-Induced Slowdown: Economists see the risk of a growth downgrade and call for stimuli to rev up growth.

“Certainly, this is a consumption-induced slowdown, which calls for policy support on the demand side. We believe further rate cuts are more or less warranted, and see the [medium-term lending facility] rates will be lowered by another 10 basis points as soon as the third quarter,” said Zhou Hao, chief economist at Guotai Junan International, SCMP reported.

China Stocks In Spotlight: The Chinese stocks listed in the U.S. could be in the spotlight in the wake of slower domestic growth. Most of the high-profile tech names in China are coming off a multi-year slowdown amid economic uncertainties and the government’s clampdown to check their sprawling businesses.

These companies also find themselves in the crosshairs of the U.S.-China political tensions.

The softer second-quarter growth does not bode well for tech names such as Alibaba Group Holding Limited BABA, Tencent Holdings Limited TCEHY, and JD.com, Inc. JD as well as new energy vehicle manufacturers such as BYD Company Limited BYDDY BYDDF and Nio, Inc. NIO.

The iShares MSCI China ETF MCHI, an exchange-traded fund that tracks the performance of U.S.-listed Chinese equities, ended Friday’s session down 1.71% at $46.64. The ETF is down about 1% this year despite the broader market rally.

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