But persistent weakness in retail sales and investment, combined with the increase in the number of cases in one of China’s main export markets – the United States – and rising political tensions with Washington, mean that Beijing is returning to a tangible economic recovery for the majority of the country’s population. could be bumpy.
China’s gross domestic product (GDP), the most widely used measure of economic performance, increased 3.2% in the April-June period compared to the same quarter last year. It was faster than the 2.5% average growth predicted in a survey of economists Reuters News Agency, according to data provider Refinitiv. A Bloomberg poll predicted a growth rate of 2.4%.
The latest figure follows a historic 6.8% year-over-year drop in the first three months of 2020. It was China’s first economic contraction since at least 1992, when it started publishing quarterly GDP data.
“The national economy has gradually overcome the negative effects of the epidemic during the first half of the year and has shown a dynamic of restorative growth and gradual recovery, further demonstrating its resilience and vitality in development,” said the Bureau. Chinese national statistics in a statement accompanying the figures.
“Mount external risks”
But he added a note of caution.
« However, we must also be aware that some indicators are still falling and that losses caused by the epidemic must be recovered. Given the continuing spread of the epidemic on a global scale, the enormous evolutionary impact of the epidemic on the global economy and the significantly increasing external risks and challenges, the national economic recovery was still under pressure,“Said the agency.
These declining indicators included retail sales, which fell 1.8% in June from the same month last year, the fifth consecutive month of contraction and performance worse than analysts’ forecasts of a slight recovery .
Capital investment – the amount of money organizations spend on machinery, buildings, land or new technology, which includes government infrastructure spending – decreased 3.1% year-over-year first semester 2020.
But many economists say the overall picture of the Chinese economy is getting clearer.
« Q2 [second quarter] The GDP result was very positive, showing that the Chinese economy rebounded vigorously after the severe impact of the pandemic in the first quarter [first quarter] 2020. The manufacturing sector is now growing at a sustained pace, industrial production increasing by 4.8% over one year [year-on-year] in June, “Rajiv Biswas, chief economist for the Asia-Pacific region of the research firm IHS Markit, told Al Jazeera.
« China leads global economic recovery after pandemic, although EU and US also showed a significant rebound in manufacturing and services in June, according to the latest PMI surveys, ” he added.
Analysts noted that although retail sales fell further in June, the pace of decline appears to be slowing after a 16.2% contraction in March.
Another source of optimism about the rebound in domestic consumption in the coming months is the improvement in unemployment data.
The urban unemployment rate fell to 5.7% in June, from 5.9% a month earlier.
Capital Economics says the latest figure means the government’s overall unemployment rate is only half of a percentage point higher than its level at the end of last year.
« Most importantly, migrant workers, who are not properly accounted for in the surveyed rate but who represent one third of the urban workforce, have mostly returned to work, with the number working in urban areas being 3% below pre-virus levels at the end of [the second quarter] compared to the 30% year-on-year drop in late February,“Capital Economics’ senior Chinese economist Julian Evans-Pritchard said in a note to Al Jazeera.
Others were not as optimistic.
Banking giant HSBC said much of the growth in economic activity was the result of higher exports, mainly due to shipments of medical and electronic products such as laptops. Meanwhile, imports fell, particularly in April and May, strengthening the argument that domestic demand for goods and services remains weak.
And other factors are also likely to limit China’s economic performance, including the accumulation of unsold goods or components in factories, classified together as stocks.
« We believe that high inventory pressure, weak profit growth and lingering uncertainty over tensions related to COVID-19 and the United States-China are the main factors holding back the willingness of private sector companies to increase their investments,“Jingyang Chen, Greater China economist at HSBC, said in a note to Al Jazeera.
“Vwiped out in the air
And as many parts of the world are experiencing a resurgence of coronavirus cases, exports alone should not be able to support China’s growth for the rest of the year, according to some analysts.
“Once again, China will have to rely on its own devices to maintain its growth… The growth engine of [the second half of 2020] is unlikely to be external, “said Daiwa Capital Markets economists Kevin Lai and Eileen Lin.
In addition to the ongoing pandemic, the worsening of Beijing’s relations with Washington could threaten a phase 1 trade agreement signed between the two in January and slow the recovery in China, analysts said.
“New trade negotiations have stalled. There is a risk that the two parties will abandon the phase one agreement, as tensions have increased to include disputes in areas such as the pandemic, the South China Sea, Hong Kong, Taiwan and Iran ” , according to the Daiwa. analysts said in a research note sent to Al Jazeera.
A new security law imposed on Hong Kong by Beijing has led U.S. President Donald Trump to revoke Hong Kong’s special trade status in retaliation against the Chinese government.
Meanwhile, one of China’s largest tech companies, telecommunications equipment giant Huawei, is closed to key markets in the United States and, most recently, the United Kingdom as it deploys its networks. new generation 5G smartphones. Other American allies may be forced to follow this example.
National Security Council spokesman John Ullyot said on Wednesday that Trump has not ruled out new sanctions against top Chinese officials, including Hong Kong CEO Carrie Lam, in response to their handling of political unrest in the semi-autonomous territory
The Hong Kong Autonomy Act, which Trump signed on Tuesday, allows him to impose sanctions and visa restrictions on Chinese officials and financial institutions involved in the imposition of the new Chinese national security law in Hong Kong.
“The atmosphere allowing both parties to take stock of what has been written in the framework of phase one and to examine what should be on the agenda of phase two has disappeared in our opinion”, added Daiwa analysts.