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RIYADH: China’s yuan touched a two-month low against the dollar on Friday and looked set for its biggest weekly drop since May, as much weaker-than-expected economic growth data raised doubts about this year’s growth target.

China’s economy contracted sharply in the second quarter from the previous quarter while annual growth also slowed significantly, highlighting the colossal toll on activity from widespread COVID-19 lockdowns, which jolted industrial production and consumer spending.

Prior to the market opening, the People’s Bank of China set the midpoint rate at 6.7503 per dollar, weaker than the previous fix of 6.7265.

In the spot market, the onshore yuan opened at 6.7505 per dollar and eased to a low of 6.77, the weakest level since May 17. By midday, it was changing hands at 6.7663, 82 pips softer than the previous late session close.

Property shares edge down

China stocks edged down on Friday, dragged by property developers, as homebuyers’ threats to stop mortgage payments on unfinished apartments dented sentiment, despite Beijing’s assurance to solve the crisis.

Losses were capped by strong performance in consumer stocks, after data showed a surprising rise in retail sales, and as dismal economic growth in the second quarter raised expectations of more stimulus.

The CSI300 index fell 0.1 percent, to 4,320.11 points at the end of the morning session, while the Shanghai Composite Index lost 0.2 percent, to 3,273.87 points.

The Hang Seng Property Index, tracking a group of mainland-based property developers, fell 1.2 percent by the midday trading break on Friday, dragging the Hong Kong benchmark index down 1.2 percent. 

Among those hardest hit, shares in Longfor Group Holdings Ltd were down 4.5 percent, while Country Garden Holdings Co. Ltd. fell 5.5 percent by the midday break.

Chinese economy sinks in Q2

China’s economy contracted sharply in the second quarter, highlighting the colossal toll on activity from widespread COVID lockdowns and pointing to persistent pressure over coming months from a darkening global growth outlook.

Gross domestic product fell 2.6 percent in the second quarter from the previous quarter, official data showed, compared with expectations for a 1.5 percent decline and a revised 1.4 percent gain in the previous quarter.

On a year-on-year basis, GDP in the April-June quarter grew a tepid 0.4 percent, missing forecast of a 1.0 percent gain, according to a Reuters poll of analysts, a sharp slowdown from 4.8 percent in the first quarter.

For the first half of the year, GDP grew 2.5 percent, well below the government’s target of around 5.5 percent growth for this year.

H1 refinery output in first annual decline since at least 2011

China’s refinery throughput for the six months to June marked the first annual decline for the period since at least 2011, data showed on Friday, as strict COVID-19 restrictions and fuel export curbs dampened production.

For June, output was 54.94 million tons, according to data from the National Bureau of Statistics, bringing January-June processing volumes to 332.22 million tons or 13.4 million barrels per day, down 6 percent from a year earlier.

The production in June was equivalent to 13.37 million bpd — up 5 percent from 12.7 million bpd in May, but about 10 percent below the all-time high of 14.8 million bpd reached in June 2021.

The month-on-month rebound came as some independent refiners began raising production late in May, after steep cuts between February and April, in response to a moderate pick up in demand as some COVID-19 curbs were eased.

The return of Sinopec Corp’s Yangzi and Hainan refineries from overhauls also contributed to the higher processing, though the state major had to close a 320,000 bpd plant in Shanghai due to a fire on June 18. 

Production in the first six months rose 4 percent versus a year earlier to 102.88 million tons, as national oil firms accelerated developing conventional and unconventional resources on Beijing’s call to boost domestic supply security.

Despite record production, the increase remains marginal as China imports nearly three-quarters of its crude oil needs

Growth in natural gas production, however, slowed to 0.4 percent in June from a year earlier to 17.3 billion cubic meters, but output year-to-date rose 4.9 percent.

(With input from Reuters)