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Chinese consumers are buying less than they used to, and this is contributing to a lopsided economic recovery

  • The Chinese economy is showing an uneven recovery; Industrial production is rising, but retail sales are slowing.

  • Factory activity exceeded expectations, but consumers are holding back, impacting retail sales growth.

  • The real estate crisis is worsening and prices for new homes are falling at the fastest pace in more than nine years.

On Friday, China published data showing an uneven economic recovery that is putting consumers off spending.

Factory activity picked up and industrial production rose 6.7% in April from a year ago, better than the 5.5% growth expected by analysts polled by Reuters.

The employment landscape improved. The unemployment rate fell from 5.2% in March to 5% in April.

However, retail sales rose 2.3% from a year ago, a slowdown from a 3.1% increase in March and below the 3.8% that economists polled by Reuters had expected – an indication that consumers are cautious are.

Fixed asset investment growth also lagged behind expectations from January to April, rising 4.2% instead of the 4.6% analysts had expected.

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China’s epic real estate crisis worsened

Even though there are some green shoots in China’s economy, the country’s real estate market is still struggling.

Real estate investments fell by 9.8% in the first four months of the year compared to a year ago. That’s worse than the 9.5% decline recorded in the first three months of the year.

Prices for new homes also fell at the fastest pace in more than nine years in April, according to Reuters calculations based on official data.

Prices fell 0.6% month-on-month in April, deeper than a 0.3% decline in March, the fastest pace since November 2014, according to Reuters calculations based on data released Thursday from the National Bureau of Statistics (NBS).

The decline is despite Beijing’s efforts to support the real estate sector, which accounted for approx a quarter of China’s GDP.

The Chinese economy is now in a painful transition from its dependence on cheaper manufacturing and real estate to the ‘new three’ industries: electric vehicles, solar cells and lithium batteries.

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Beijing is also stepping up support measures, including selling 1 trillion Chinese yuan ($138 billion) in ultra-long special government bonds to finance infrastructure spending.

It is also considering a plan for local governments to buy millions of unsold homes, Bloomberg reported Wednesday, citing people familiar with the matter.

This is a development story. Check back later for updates.

Read the original article on Business Insider

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