Unmasking China's Q2 Economy: The Truth Behind the 5.2% GDP Growth|| Digging into China

Hi, I'm Dong Shan. Welcome to Digging into China, where we explore China in depths to review unique perspectives. As anticipated, China's GDP growth for the second quarter registered at 5.2%, a figure that's hardly surprising, almost like solving a basic math problem. Given that the fullear GDP growth must meet or exceed 5% and with the first quarter at 5.4%, what would be a fitting number for quarter two? The first quarter typically benefits from a strong start with figures often inflated. So, a 5.2% growth rate in Q2 creates a smooth GDP trajectory, reinforcing the narrative of economic resilience. While the National Bureau of Statistics data often invites skepticism, broader macroeconomic trends still offer valuable insights. This is why I continue to analyze China's economic data for you because at the very least the government's macroeconomic policy direction aligns with the figures they release. In today's video, we'll follow our usual approach using data to forecast policy trends. This time we'll delve deep examining sectors such as consumption, real estate, anti-involution measures, and the ash share market in detail. Let's begin with consumption. Based solely on official statistics, China's consumption should be robust. Why? Household income growth significantly outpaces CPI, the consumer price index, and even exceeds GDP growth. In second quarter, per capita disposable income reached 21,840, up 5.3% year on year, surpassing the 5.2% of GDP growth. While CPI remained near zero, logically with more money in people's pockets, a larger share of the GDP, and a stable prices, consumption should be thriving. Yet, China's economy is grappling with deflation. In the first half of this year, the government allocated 300 billion yen to a tradein program for consumer goods. Those funds have been dispersed, but consumption growth slowed in June despite the traditional June 18 shopping festival during which JD Muan and Alibaba invested heavily in the food delivery market. On the topic of stimulating consumption, Xi Jinping has provided a textbook example of a flawed approach this year. While he committed 300 billion UN in subsidies to boost consumption figures, he simultaneously imposed a liquor ban within the public sector, emphasizing anti-corruption and frugality, urging officials to tighten their belts. But who drives consumption in China today? its public sector workers, the ones with a stable income and a robust benefits, those able to spend confidently. Now, a single directive has stifled their spending enthusiasm. Consequently, the National Bureau of Statistics presented Shei with a report showing a sharp decline in catering revenue growth for June. Doesn't it seem like the 300 billion UN in subsidies was squandered? Liquor maltise prices have dropped repeatedly this year, leaving sculpers with heavy losses. Some attribute this to she's liquor ban, claiming public sector workers are too worried to buy Maltai, reducing demand. But a closer look reveals that Maltai's profit remains untouched. The factory price hasn't budged. Only wholesale prices in distribution channels have fallen. The losses are borne by dealers and sculpers, not Mao Thai itself, whose financial reports remain strong. From she's perspective, the liquor ban makes sense. He aims to make Mao Thai more accessible, stripping away its image as a symbol of elite privilege. It also serves as an anti-corruption measure, appealing to public sentiment, easing class tensions and offering psychological reassurance to the masses. Best of all, it doesn't hinder tax revenue. Maai's profits continue to rise and tax contributions grow. As for the consumption chain, how a liquor ban spares Ma Thai but devastates restaurants, that's beyond the she's understanding. It's simply not in his playbook. Next, let's address the food delivery platform wars. She likely in instructed the regulators to press major tech firms to prioritize the welfare of delivery writers. In his straightforward view, increasing people's income means supporting grassroots workers like writers. But the food delivery ecosystem isn't just writers. It includes countless merchants and their employees. platforms heeding she's call have improved the conditions for writers but in doing so have indirectly squeezed the merchants and their workers merchants bear the cost of subsidies while their employees face grueling overtime without pay increases effectively reducing their income thus she's vision of boosting people's income falters platforms have merely shifted funds from merchants to writers leaving the broader population with no real gains. China's business news revealed the true plight of merchants in this subsidy war. On the surface, platforms didn't impose additional subsidy burdens on merchants. Business as usual, but consider a milk tea shop selling a 19 yen drink. The merchant subsidizes a 6.4 yen, then deducts delivery fees and the platform commissions, netting just six. Some merchants caught by platform algorithm inexplicably shoulder the 14 yen subsidy earning only one and a half yen per drink. Clearly delivery platforms met she's anti-involution targets by boosting rider incomes while quietly eroding merchants profits to minimize their own losses. It's a clever maneuver and one wonders if she will eventually see through it. But with the government reluctant to increase fiscal spending and expecting companies to bear social responsibilities, private firms prioritize their stock prices and profits over statedriven goals. With the subsidy funds depleted, how will consumption data fare in the second half of the year? Will Xiinping pour in another few hundred billion yen? I consider that highly unlikely. It's evident that in the second half the central government will rely on window guidance allowing local governments and companies to drive consumption efforts. Economically strong provinces can issue consumption vouchers while others may fabricate consumption scenarios or craft compelling narratives leaving the National Bureau of Statistics to tidy up the results. turn into investment. Two key factors define the second quarter. First, in economically advanced eastern regions, fixed asset investment growth was negative this year. Only the central and western regions continue to bolster investment figures. Why? They have no alternative. Without the project financing platforms to sustain construction and a spread cost, counties in these regions would struggle to pay salaries. Second, real estate data paints the bleakest picture. From investment and sales to price declines, even the National Bureau of Statistics acknowledged at a mid July press conference that the real estate sector faces severe challenges calling for stronger stabilization measures. Yet the central bank previously stated that the real estate had already stabilized and the focus was on maintaining that stability. So whose narrative holds the central banks or the statistic bureaus? It's straightforward. The central bank is a signaling that monetary policy has done its part and it's a stepping back from real estate. The Statistics Bureau's remarks align with the central urban work conference, setting the stage for real estate policy expectations. But will new real estate policies emerge in the second half? Likely not. Unfortunately, the conference is a fanfare is the extent of the stimulus. Consider the Central urban work conference heralded as a once in a decade event. The 2015 conference triggered a real estate surge. So, property stocks rallied in anticipation this time. But the content, it's all about urban renewal. No Shante Town redevelopment 2.0, no priced driven inventory clearance. Unlike a shanty town redevelopment which fuel the land sales and a quick cash for local governments, urban renewal demands upfront local investment with returns stretching over 20 to 30 years. Tracing the cash flow clarifies the situation. Land finance is defunct and so is real estate. The central bank has already signaled no further monetary support without the fiscal intervention. It's all rhetoric and expectation management with the stock market taking a hit to clear real estate debts. My advice, avoid Chinese property stocks. Lastly, let's address this year's major macroeconomic theme, anti-involution. Consider this data. In second quarter, national industry capacity utilization was 74%. Typically first quarter is lower due to the spring festival but this year Q2's rate was one was onetenth percentage points below Q1. Compare this to 2016 during Leica Ch's supply side reforms when Q2 capacity utilization was 73.1%. This explains she's aggressive push against evolution. It's reached a critical point. The auto industry's capacity utilization is at 71% and the food manufacturing tied to domestic demand is at 69%. Further competition risks mutual destruction. External demand faces tariff uncertainties. Domestic incomes remain unrepaired and businesses are lacked in a cycle of relentless competition. As we've noted, China's persistent overcapacity stems from nonmarket forces. government intervention causing resource misallocation. The government has supplanted the market leading to greater disorder. Policydriven Asia sectors tied to anti-evolution are performing strongly over the past months. The photovoltaic equipment index rose 15.6% electronic components 20.4% glass and fiberglass 20.2% general steel 12.4%. 4% and the cyclical sectors like a steel and a cement gained 7 to 9%. Despite weak economic fundamentals, policy signals have driven the Shanghai index to 3,500. But this isn't a bold market. Trading volumes tells the story. It's modest during rises, spiking only during drops or failed rallies. Market confidence is fragile. The index relies on policydriven surges. Bank sectors recently hit record highs, boosting the index. But if you didn't invest in big finance, you are likely losing money. In Asares, it's a structural market. You must align with policy signals to profit. Recall past bull markets. Funds flooded in. All stocks rose and new capital kept flowing. Now there is a finite pool of money. Boosting bank stocks leaves others behind. A shares aren't drawing new capital. So the focus is on popping up the index to preserve she's reputation. If someone claims a bull market is underway, take it with a grain of salt. Ask them to buy bank stocks now. They likely won't. That's the state of market confidence. In summary, while Q2 economic data appears solid overall, June showed a clear declines with investment and consumption trends turning downward. This suggests the first half was propped up by policy. But once resources are exhausted, the effect fades and the economy reveals its true state downward. Be aware the Chinese government's policy response is often delayed, largely due to she's leadership. Having only recently grasped the concept of deflation, he may view second quarters of 5.2% 2% GDP growth as evidence of a robust economic resilience potentially leading him to take a passive stance in third quarter. We should focus on two critical developments. First, the outcome of the second round of China US trade war negotiations. Second, whether the Federal Reserve cut rates in third quarter. Once these signals emerge, we'll have a clear sense of she's next steps. Thank you so much for watching. And if you find this video helpful, please like it, drop a comment below, and hit the subscribe button right here. It really helps YouTube suggest my video to others. I'll be back with more content soon. Until then, be well.