The Bund promenade in Shanghai. China's economy grew at a slower-than-expected pace in the second quarter. AFP
The Bund promenade in Shanghai. China's economy grew at a slower-than-expected pace in the second quarter. AFP
The Bund promenade in Shanghai. China's economy grew at a slower-than-expected pace in the second quarter. AFP
The Bund promenade in Shanghai. China's economy grew at a slower-than-expected pace in the second quarter. AFP

China's economy expands 6.3% in second quarter but misses estimates


Massoud A Derhally
  • English
  • Arabic

China's economy accelerated at a fast pace in the second quarter of this year as it continued to recover from the coronavirus-induced slowdown but the pace of growth was slower than expected.

Gross domestic product in the world's second-largest economy expanded by an annual 6.3 per cent from April to June, after growing 4.5 per cent in the previous three months as the country removed Covid-19 restrictions and reopened, according to the latest data released on Monday by the National Bureau of Statistics.

However, the pace of growth in the second quarter missed the 7.1 per cent estimate of economists polled by Bloomberg and the 7.3 per cent forecast of those surveyed by Reuters.

Quarterly GDP growth was only 0.8 per cent between April and June, compared with the previous three months.

China's retail sales grew 3.1 per cent in June, slowing from 12.7 per cent in May, the data showed, while the urban surveyed unemployment rate in 31 major cities stood at 5.5 per cent, the same as that of the previous month.

The unemployment rate for the 16 to 24 age group was 21.3 per cent while that for the 25 to 59 age group was 4.1 per cent, government data showed.

Industrial output growth accelerated at an annual 4.4 per cent in June, from 3.5 per cent in May.

The Manufacturing Purchasing Managers’ Index for June stood at 49 per cent while the Production and Operation Expectation Index was at 53.4 per cent.

A reading over 50 indicates an expansion in business conditions, while one below represents a contraction.

"Recent economic data out of China have pointed to declines in exports, weak retail sales and continued troubles in the Chinese property market, which are all factors likely to have weighed on activity in the second quarter," Emirates NBD economists said in a research note.

The People’s Bank of China (PBOC), left its benchmark interest rate unchanged on Monday at 2.65 per cent. It had cut the key policy rate in June.

"To negate weak internal demand and eroding consumer confidence, expansionary fiscal stimulus measures are likely to be more effective than more interest rate cuts, and accommodating monetary policy in a deflationary environment reduces the 'marginal benefit' from an extra added effort of monetary policy stimulus; a 'liquidity trap scenario'," said Kelvin Wong, a senior market analyst at Oanda.

China’s benchmark CSI 300 stock market index fell 1.09 per cent as of 7.46am UAE time, its first decline since July 12. The onshore yuan weakened by 0.31 per cent to 7.1776 per dollar.

"The Chinese property downturn, risk of disinflation, and falling exports have been difficult to reverse. As a result, the knee-jerk reaction in markets was unenthusiastic," said Ipek Ozkardeskaya, a senior analyst at Swissquote Bank.

China's recovery has been weaker than expected due to sluggish domestic and international consumer demand in line with International Monetary Fund's expectations of a “rocky” recovery for the global economy as geopolitics, monetary tightening and inflation, although declining, continue to weigh on growth.

World trade growth is expected to decline this year to 2.4 per cent, despite an easing of supply bottlenecks, before rising to 3.5 per cent in 2024, after growing by 5.1 per cent in 2022, according to the fund.

The IMF estimates China's economy will grow by 5.2 per cent in 2023, following a 3 per cent expansion in 2022, as it benefits from a full reopening this year.

Some analysts expect the PBOC to provide more stimulus and the government to boost spending to spur growth.

Earlier in the year, Goldman Sachs had said the reopening of China’s economy and a full recovery in the country's domestic demand could raise global output by about 1 per cent in 2023 and lead to a rally in oil prices.

India and China will account for half of global growth this year, compared with only a tenth for the US and euro area combined, according to the IMF.

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How to play the stock market recovery in 2021?

If you are looking to build your long-term wealth in 2021 and beyond, the stock market is still the best place to do it as equities powered on despite the pandemic.

Investing in individual stocks is not for everyone and most private investors should stick to mutual funds and ETFs, but there are some thrilling opportunities for those who understand the risks.

Peter Garnry, head of equity strategy at Saxo Bank, says the 20 best-performing US and European stocks have delivered an average return year-to-date of 148 per cent, measured in local currency terms.

Online marketplace Etsy was the best performer with a return of 330.6 per cent, followed by communications software company Sinch (315.4 per cent), online supermarket HelloFresh (232.8 per cent) and fuel cells specialist NEL (191.7 per cent).

Mr Garnry says digital companies benefited from the lockdown, while green energy firms flew as efforts to combat climate change were ramped up, helped in part by the European Union’s green deal. 

Electric car company Tesla would be on the list if it had been part of the S&P 500 Index, but it only joined on December 21. “Tesla has become one of the most valuable companies in the world this year as demand for electric vehicles has grown dramatically,” Mr Garnry says.

By contrast, the 20 worst-performing European stocks fell 54 per cent on average, with European banks hit by the economic fallout from the pandemic, while cruise liners and airline stocks suffered due to travel restrictions.

As demand for energy fell, the oil and gas industry had a tough year, too.

Mr Garnry says the biggest story this year was the “absolute crunch” in so-called value stocks, companies that trade at low valuations compared to their earnings and growth potential.

He says they are “heavily tilted towards financials, miners, energy, utilities and industrials, which have all been hit hard by the Covid-19 pandemic”. “The last year saw these cheap stocks become cheaper and expensive stocks have become more expensive.” 

This has triggered excited talk about the “great value rotation” but Mr Garnry remains sceptical. “We need to see a breakout of interest rates combined with higher inflation before we join the crowd.”

Always remember that past performance is not a guarantee of future returns. Last year’s winners often turn out to be this year’s losers, and vice-versa.

 


 

Ten tax points to be aware of in 2026

1. Domestic VAT refund amendments: request your refund within five years

If a business does not apply for the refund on time, they lose their credit.

2. E-invoicing in the UAE

Businesses should continue preparing for the implementation of e-invoicing in the UAE, with 2026 a preparation and transition period ahead of phased mandatory adoption. 

3. More tax audits

Tax authorities are increasingly using data already available across multiple filings to identify audit risks. 

4. More beneficial VAT and excise tax penalty regime

Tax disputes are expected to become more frequent and more structured, with clearer administrative objection and appeal processes. The UAE has adopted a new penalty regime for VAT and excise disputes, which now mirrors the penalty regime for corporate tax.

5. Greater emphasis on statutory audit

There is a greater need for the accuracy of financial statements. The International Financial Reporting Standards standards need to be strictly adhered to and, as a result, the quality of the audits will need to increase.

6. Further transfer pricing enforcement

Transfer pricing enforcement, which refers to the practice of establishing prices for internal transactions between related entities, is expected to broaden in scope. The UAE will shortly open the possibility to negotiate advance pricing agreements, or essentially rulings for transfer pricing purposes. 

7. Limited time periods for audits

Recent amendments also introduce a default five-year limitation period for tax audits and assessments, subject to specific statutory exceptions. While the standard audit and assessment period is five years, this may be extended to up to 15 years in cases involving fraud or tax evasion. 

8. Pillar 2 implementation 

Many multinational groups will begin to feel the practical effect of the Domestic Minimum Top-Up Tax (DMTT), the UAE's implementation of the OECD’s global minimum tax under Pillar 2. While the rules apply for financial years starting on or after January 1, 2025, it is 2026 that marks the transition to an operational phase.

9. Reduced compliance obligations for imported goods and services

Businesses that apply the reverse-charge mechanism for VAT purposes in the UAE may benefit from reduced compliance obligations. 

10. Substance and CbC reporting focus

Tax authorities are expected to continue strengthening the enforcement of economic substance and Country-by-Country (CbC) reporting frameworks. In the UAE, these regimes are increasingly being used as risk-assessment tools, providing tax authorities with a comprehensive view of multinational groups’ global footprints and enabling them to assess whether profits are aligned with real economic activity. 

Contributed by Thomas Vanhee and Hend Rashwan, Aurifer

The chef's advice

Troy Payne, head chef at Abu Dhabi’s newest healthy eatery Sanderson’s in Al Seef Resort & Spa, says singles need to change their mindset about how they approach the supermarket.

“They feel like they can’t buy one cucumber,” he says. “But I can walk into a shop – I feed two people at home – and I’ll walk into a shop and I buy one cucumber, I’ll buy one onion.”

Mr Payne asks for the sticker to be placed directly on each item, rather than face the temptation of filling one of the two-kilogram capacity plastic bags on offer.

The chef also advises singletons not get too hung up on “organic”, particularly high-priced varieties that have been flown in from far-flung locales. Local produce is often grown sustainably, and far cheaper, he says.

Top 10 in the F1 drivers' standings

1. Sebastian Vettel, Ferrari 202 points

2. Lewis Hamilton, Mercedes-GP 188

3. Valtteri Bottas, Mercedes-GP 169

4. Daniel Ricciardo, Red Bull Racing 117

5. Kimi Raikkonen, Ferrari 116

6. Max Verstappen, Red Bull Racing 67

7. Sergio Perez, Force India 56

8. Esteban Ocon, Force India 45

9. Carlos Sainz Jr, Toro Rosso 35

10. Nico Hulkenberg, Renault 26

HUNGARIAN GRAND PRIX RESULT

1. Sebastian Vettel, Ferrari 1:39:46.713
2. Kimi Raikkonen, Ferrari 00:00.908
3. Valtteri Bottas, Mercedes-GP 00:12.462
4. Lewis Hamilton, Mercedes-GP 00:12.885
5. Max Verstappen, Red Bull Racing 00:13.276
6. Fernando Alonso, McLaren 01:11.223
7. Carlos Sainz Jr, Toro Rosso 1 lap
8. Sergio Perez, Force India 1 lap
9. Esteban Ocon, Force India  1 lap
10. Stoffel Vandoorne, McLaren 1 lap
11. Daniil Kvyat, Toro Rosso 1 lap
12. Jolyon Palmer, Renault 1 lap
13. Kevin Magnussen, Haas 1 lap
14. Lance Stroll, Williams 1 lap
15. Pascal Wehrlein, Sauber 2 laps
16. Marcus Ericsson, Sauber 2 laps
17r. Nico Huelkenberg, Renault 3 laps
r. Paul Di Resta, Williams 10 laps
r. Romain Grosjean, Haas 50 laps
r. Daniel Ricciardo, Red Bull Racing 70 laps

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  2. Kings School Al Barsha (Dubai) – Dh71,905
  3. Brighton College Abu Dhabi - Dh68,560
  4. Jumeirah English Speaking School (Dubai) – Dh59,728
  5. Gems Wellington International School – Dubai Branch – Dh58,488
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  7. Dubai English Speaking School – Dh51,269

*Annual tuition fees covering the 2024/2025 academic year

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Predictions

Predicted winners for final round of games before play-offs:

  • Friday: Delhi v Chennai - Chennai
  • Saturday: Rajasthan v Bangalore - Bangalore
  • Saturday: Hyderabad v Kolkata - Hyderabad
  • Sunday: Delhi v Mumbai - Mumbai
  • Sunday - Chennai v Punjab - Chennai

Final top-four (who will make play-offs): Chennai, Hyderabad, Mumbai and Bangalore

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Manchester United 1 (Fernandes pen 2') Tottenham Hotspur 6 (Ndombele 4', Son 7' & 37' Kane (30' & pen 79, Aurier 51')

Man of the match Son Heung-min (Tottenham)

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West Asia Premiership

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Rating: 4.5/5

Updated: July 17, 2023, 6:32 AM