**Abstract**
The China Center for World Economy (CCWE) at Tsinghua University recently released its macroeconomic forecast for the second quarter of this year. The report highlights that the upward trend in China’s economy, which had been observed since the second half of last year, is expected to slow down starting from the second quarter. This shift is attributed to several factors, including the impact of new real estate policies and the ongoing adjustments in monetary policy.
According to the report, the GDP growth rate for the first quarter reached 8.2%, but this momentum is likely to weaken in the coming months. The CCWE predicts that economic growth will gradually slow down in the second half of the year, with inflationary pressures increasing significantly. Monthly consumer price index (CPI) increases are expected to surpass 4% in the latter part of the year.
One of the key reasons for this slowdown is the implementation of the "National Five Articles" real estate regulation policy, which has introduced uncertainty into the market. Additionally, the decline in the growth rate of M2 money supply has led to a more neutral monetary policy stance, further contributing to the deceleration in economic growth. Based on the CCWE model, the annual GDP growth rate is projected to be around 7.9%.
Looking at the retail sector, data from the National Bureau of Statistics shows that total retail sales of consumer goods in January and February 2013 reached 378 billion yuan, representing a nominal increase of 12.3% compared to the same period last year. However, this growth was much lower than the previous month's rate, declining by 2.9 percentage points. This marked a significant drop, especially when compared to earlier months.
The report also notes that while seasonal factors typically cause a slight decline in retail growth during the first two months of the year, the drop in food consumption this year has been more pronounced than in previous years. This suggests that broader economic challenges may be affecting consumer behavior.
Despite the downward pressure on consumption, inflation remains a concern. Although the CPI in February stood at 3.2%, this figure was largely influenced by seasonal factors. However, long-term pressures such as urbanization-driven demand for construction materials, global monetary easing, and imported inflation are expected to push prices higher. Additionally, rising pork prices due to supply constraints could trigger a new round of inflation. As a result, the monthly inflation rate is expected to exceed 4% in the second half of the year, with an annual average reaching 3.62%, slightly above the government's target of 3.5%.
Li Daokui, director of the CCWE, noted that while exports remain relatively optimistic, this is mainly due to a short-term rebound in European and American markets. The impact on China’s domestic economy, however, is limited. In the short term, the Chinese economy faces downside risks, while medium-term structural adjustment pressures continue to build. These challenges require proactive reforms to address. If the new government implements timely reforms, China may still enter a new phase of economic growth.
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