According to Albert Park, chief economist of the Asian Development Bank, China’s hesitant consumer confidence has been “a dampener” for its frail recovery.  

The second-largest economy in the world earlier this week released second quarter GDP figures that mostly fell short of forecasts.

Retail sales increased 3.1% in June, while China’s economy expanded 6.3% from the same period a year earlier, raising concerns that the country’s post-Covid boom is slowing.

“What we really hope is that China’s consumers and businesses will regain confidence to start spending more and to invest more,” Park told CNBC’s “Squawk Box Asia” on Wednesday.

“We’re seeing their caution in this respect really being a dampener that’s causing the sluggish recovery in China.”

As the economic recovery continued to falter, the People’s Bank of China lowered its key policy rate for the first time in ten months last month.

“The central bank lowered interest rates recently in an effort to help stimulate the economy, but they have to be careful,” cautioned Park. “They’ve been a pretty disciplined in trying to deleverage the economy, in terms of debt levels.”

After the pandemic had been going on for a while, he did remark that the nation’s “very elevated debt levels” were still present. Late last year, China lifted its severe Covid restrictions.

China is expected to develop by 5% this year, according to ADB’s outlook report, which was released on Wednesday. This projection is unchanged from that of April.

“Growth in manufacturing investment is expected to moderate in line with cooling exports, while that of infrastructure investment is likely to remain stable,” the bank said of China. “Monetary and fiscal policies will continue to support economic recovery, particularly to boost domestic demand.”

The bank kept its prediction for 2023 but reduced its estimate for emerging Asia’s economic growth in the following year.

The ADB’s reduction of its 2024 estimate from 4.8% to 4.7% reflects an overall outlook that is “dimmed by lagged effects from interest rate hikes.” However, the region is still anticipated to increase 4.8% in 2023, the same as the bank’s April prediction.

(Adapted from VerveTimes.com)

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