China’s economic recovery gained momentum in July as business activities resumed and confidence improved, despite disruptions from sporadic Covid outbreaks across the country.
Small business confidence improved on stronger expectations and better credit conditions, according to Standard Chartered Plc., which surveys more than 500 smaller firms each month. Overall production remained robust, while construction activity picked up thanks to policy support, the firm’s economists Hunter Chan and Ding Shuang wrote in a report.
However, activity in July “failed to accelerate,” with readings normalizing from the recovery in June, they wrote, adding that “sporadic Covid outbreaks in provinces including Shandong, Guangdong and Shanghai may have disrupted activity” labour-intensive smaller and medium-sized industrial companies.
Home sales continued declining in the first three weeks of July in the top four cities in China, although the fall was at a slower pace. The housing market has been in a slump for a year, with prices and home purchases falling, developers defaulting and now a growing number of people refusing to pay their mortgages on properties that haven’t been delivered by cash-strapped builders.
However, the car market improved due to the relaxation of Covid restrictions and a government push to boost sales. In May, China halved the purchase tax on some low-emission passenger vehicles. The government is expediting a study about extending purchase tax exemptions for electric cars and examining ways of boosting car sales in rural areas.
External demand likely stayed resilient in July, providing continued support for China’s economy after the record trade surplus in June. South Korean exports, a leading indicator for global trade, rose 14.5% in the first 20 days of July from a year earlier, despite concerns about a global recession that may dampen demand.
Data showed that Chinese demand for imports continued to slow, indicating the lingering effects of the slowdown in the second quarter.