More policies urged to facilitate services sector's comeback, spur consumption
China's growth recovery is set to continue in the second half of the
year, and Beijing's policies are expected to focus on narrowing the
development gaps amid the rapid and yet uneven rebound to consolidate
the economy's long-term resilience, economists said.
They expect the government's main objectives to continue to center
around stabilizing employment and ensuring corporate survival while
retaining policy room for any shocks generated by the potential
resurgence of the COVID-19 pandemic.
While the world is still struggling with the impact of the pandemic,
China's economy made a strong bounce-back in the second quarter, beating
economists' expectations by growing 3.2 percent from a year earlier.
Analysts are now pondering the sustainability of such strong rebound
momentum and how China's policy may evolve in the second half of the
year to keep its economy on a steady recovery path.
The general view among economists is that China's recovery will
continue in the second half but the sequential pace may be slower as the
economy continues to face acute challenges such as persisting
unemployment pressure and the possibility of the resurgence of the
China will need to step up policy support to address some of the
uneven patterns behind the strong rebound, economists said. For example,
household consumption remained subdued as national retail sales
declined 1.8 percent year-on-year in June, and the recovery of the
services sector has fallen behind the country's industrial production
and construction growth.
"The economy has recovered well with respect to industrial production
while services took a hit in the first half of the year. In the coming
months, we will likely see this performance gap narrowing and economic
growth accelerating," said Dominik Peschel, head of the economics unit
for the Asian Development Bank's resident mission in China.
Economists expect that more supportive policies will be rolled out to
facilitate a stronger recovery of the services sector and to spur
Peschel said that the resumption of household consumption will play a
crucial role in the continuity of China's recovery in the coming
months. The prerequisites for domestic consumption to pick up include
the avoidance of a second wave of COVID-19, supportive government
policies aiming at stabilizing employment and household incomes, and an
improvement in consumer sentiment, he added.
Meanwhile, policy efforts should continue to focus on ensuring that
businesses－especially small and medium-sized enterprises－obtain
sufficient credit at a reasonable interest rate as employment generation
and improvements to people's basic livelihoods largely depend on the
capacity of businesses to continue employing staff in a challenging
economic environment, Peschel added.
Most economists see no imminent reversal of China's overall policy
easing stance after a senior official of the National Bureau of
Statistics said on Friday that the national economic recovery remains
under pressure as the losses caused by the pandemic have not been fully
recouped and getting the economy back to normal is still a strenuous
Wang Jinbin, deputy dean of the School of Economics at Renmin
University of China, said during an online forum on Saturday that
China's overall credit supply will likely be kept at a high level in the
coming quarters and more fiscal spending can be expected to help the
disaster relief effort and reconstruction in the flood-affected southern
Economists said that China's future policy will continue to reflect
the central leadership's idea of maintaining its strategic focus and the
bottom-line thinking to prevent the country's economy from suffering
unexpected damage given the highly uncertain outlook for the global
"We think the continued growth recovery in the second quarter will
not reverse the overall policy easing stance in the third quarter as
economic activities have yet to fully return to normal, job market
pressure persists and growth uncertainties linger," China economists at
Swiss bank UBS said.
But the central leadership may reassess the mix of policy easing in
the months to come as China's growth normalizes and external demand
recovers, they said.
Yi Gang, governor of the People's Bank of China, the central bank,
said recently that the country needs to prevent its supportive financial
policy from diminishing incentives and the government needs to pay more
attention to the policy's side effects.
The country's financial regulators have been keeping a vigilant eye
on the recent rapid rise of asset prices as well as the potential growth
of nonperforming loans in the banking sector amid concerns that the
rapid buildup of leverage and the potential surge of bad loans could
jeopardize the stability of the country's financial system.
Hua Changchun, chief economist at Guotai Jun'an Securities, said that
government policy needs to strike a balance between supporting the
economic recovery and preventing financial risks and asset bubbles in