BEIJING — After a year of leading the global economy out of the pandemic slump, China’s growth is now starting to level off, as the world tries to digest whether the country’s recovery will continue or peter out.
The signs are mixed, with consumers and companies showing signs of both weakness and strength. The rising cost of raw materials is eating into the profits of factories and retailers, while exports remain strong. People are shopping more, but small businesses are suffering. And the ongoing uncertainty of the pandemic weighs over it all.
China reported on Thursday that its economy grew 7.9 percent from April through June, compared to the same period last year, falling short of estimates. Although that pace is still stronger than many other countries, it is markedly slower than the 18.3 percent leap the economy made in the first three months of the year.
China’s ultimate trajectory will be closely watched by the world. If China’s economy further slows, it could drag down the rest of the global economy. Many countries now depend on Chinese factories and consumers. If China continues to chug along, it could portend a sustained recovery for the United States and other nations now bouncing back from their pandemic lows.
The Chinese government has sent a series of recent signals that economic growth might be in trouble. Premier Li Keqiang has held three high-profile meetings just in the past week on the economy’s health and issued statements after each of them, ordering a blizzard of measures to sustain growth.
The most important of these measures was a policy shift by the central bank. China’s central bank moved to help small businesses get loans; starting on Thursday commercial banks can keep somewhat smaller cash reserves. In theory, that frees the banks to lend more, which could stimulate business investments and consumer spending.
But looming over the country’s economy is an accumulated mountain of corporate and household debt. Beijing has begun tolerating some bond defaults, and has hinted lately at the possibility that it might not help some state-owned enterprises pay their debts in full.
China Beige Book, a quarterly survey of businesses across China, has found in recent weeks that many borrowers, especially retailers, have become cautious about taking out loans. Companies fear that they might not be able to repay additional loans.
The latest data may signal the limits of China’s post-pandemic recovery. Barclays Bank said in a research note that China seems to have settled into a new annual growth range of 5 to 5.5 percent. While considerably better than the growth in most Western countries, it is slower than the 6 to 6.5 percent growth China saw before the pandemic.
“At home, the economic recovery is unbalanced,” said Liu Aihua, the spokeswoman of China’s National Bureau of Statistics. “More efforts are needed to consolidate the foundation for the steady recovery of development.”
Li You and Liu Yi contributed research.