Rebound in nation fueled by business resumption and investment stimulus China's economy has staged a fast recovery from the COVID-19 impact,
with the year-on-year GDP growth likely to turn positive at above 2
percent in the second quarter of the year, economists said on Monday. Business resumption and investment stimulus have been the key
ingredients of the economic rebound, while the country still needs to
deal with mounting uncertainties while trying to sustain the recovery,
they said. Attention has been focused on the performance of China's economic
recovery from the COVID-19 disruption, as the country is set to unveil
the second-quarter GDP growth and other key economic data next week. Leading economic indicators have pointed to a fast recovery mainly
driven by supply-side improvements thanks to the nationwide resumption
of production, said Wu Chaoming, deputy dean of the Chasing Institute
under the aegis of Chasing Securities. The official Purchasing Managers Index of the manufacturing sector
rose to 50.9 last month from 50.6 in May, the fourth consecutive month
for the index to remain within the expansion territory, according to the
National Bureau of Statistics. The growth in industrial output for the first half of the year may be
around negative 0.8 percent year-on-year, sending the GDP growth for
the same period to negative 1.6 percent, versus a 6.8-percent plunge for
the first quarter, Wu said. He said that the GDP growth rate for the second quarter may be around 3 percent. The recovery in demand, however, may have lagged behind, Wu said, as
impaired income prospects of businesses and households and the continued
social distancing measures weighed on the recovery in manufacturing
investment and consumption. Looking ahead, infrastructure investment backed by government bond
issuance may become the backbone of expanding demand and is expected to
grow by around 18 percent for the whole year, Wu said. "This year's strongest growth point would be investment," said Hu
Yifan, regional chief investment officer and chief China economist with
UBS Global Wealth Management. On top of infrastructure investment, property development investment
is expected to be another pillar in investment recovery amid rather
favorable policy conditions, Hu said, adding that consumption in the
offline services sector is also expected to further recover as social
distancing measures ease. The faster-than-expected economic recovery has helped fuel the recent
surge in the A-share market, analysts said. The benchmark Shanghai
Composite Index has risen by 11.67 percent since the beginning of the
month and closed on Monday at 3332.88 points, the highest level in more
than two years. However, analysts said uncertainties still exist in the second half
of the year and could threaten the strength of economic recovery, with
the epidemic control situation remaining the biggest unstable factor. Given that the country has become more experienced in dealing with
the disease, it is unlikely to see another major disruption comparable
to the one that occurred at the beginning of the year, said Ying Xiwen, a
regional economics researcher with China Minsheng Bank. "But a full economic normalization could be hard to achieve as
regular epidemic control measures may continue and even intensify in the
fourth quarter as the weather cools down," Ying said. China's economic growth may recover to around 5 percent in the second
half of the year, further recovering from the projected 2.9 percent for
the April-June period, he said. Analysts with Nomura also warned that the possible deterioration of
external demand and the trade row with the United States could weigh on
China's economic recovery. "Some pent-up demand will naturally lose steam and exports may fall
significantly when demand for medical exports peaks and the slump in new
exports orders finally reduces production," they said in a report.
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