China’s economic numbers come in better than expected, but ‘difficulties and challenges’ remain

New energy vehicles, which include hybrid and battery-powered cars, have seen sales surge in China despite a slump in the overall car market. Pictured here is an unnamed new energy vehicle factory in Jiangsu province on June 13, 2022.

China's economic data for May was better than expected due to Covid controls. Analysts expected industrial production to fall by 0.7% in May but it rose by 0.7%. Industrial production was down in April. Retail sales were down in May from a year earlier. According to the poll, retail sales fell by 7.1% in May. Retail sales fell in April. Fixed asset investment increased by 6.2% in the first five months of the year.

China's National Bureau of Statistics said in a statement that the economy "showed a good momentum of recovery" in May and that major indicators improved marginally.

The domestic economy is still facing difficulties and challenges for recovery, the bureau said.

In U.S. dollar terms, China's exports increased by a better-than- expected 16.9% in May. The increase in imports was greater than expected.

Beijing and Shanghai, China's two largest cities by gross domestic product, have had to put tighter Covid controls in place.

Major businesses were shut down in April and May. On June 1st, the city reopened.

People in Beijing's biggest business district were told to work from home in May, while restaurants in the capital were only allowed to serve takeout or delivery. Most restaurants in Beijing were allowed to resume in-store dining in early June, but schools have not resumed in-person classes.

Consumer spending has been affected by uncertainty. In April, the unemployment rate in China's 31 largest cities reached a record high of 6.7%, up from the previous high of 2020. The unemployment rate in cities fell to 5.9% in May from 5.9% in April.

The unemployment rate for young people increased to 18.4% in May from 18.2% in April.

Francoise Huang, senior economist at Allianz Trade, said in a phone interview last week that the unemployment rate should come down as the restrictions are being loosened.

She thinks that we should see some recovery in the second half of the year. It is not a V-shaped rebound, quick and strong rebound, or post- Covid recovery, because the policy easing is not that strong and external demand is not that strong.