Poll sees China economy picking up pace in Q3

With the virus now largely under control in China, consumers are back in restaurants and malls, and travelling for domestic holidays and to tourist districts. (AFP)
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Updated 18 October 2020

Poll sees China economy picking up pace in Q3

  • Consumer spending gradually increasing as coronavirus fears ease

BEIJING: China’s economic recovery gathered pace in the third quarter, according to a poll of analysts, with consumer spending gradually picking up as coronavirus fears eased, helping a wider rebound spurred by investment and exports.

Growth in July-September is expected to come in at 5.2 percent when official data is released on Monday, bringing the world’s second-largest economy closer to last year’s 6.1 percent annual expansion, even as countries around the world struggle to contain the deadly pandemic.

With the virus now largely under control in China, most social distancing measures have been removed — and consumers have streamed back into restaurants and malls, hopped on flights and trains for domestic holidays and packed tourist districts.

AFP’s survey, involving analysts from 13 institutions, also forecast full-year growth of 2.3 percent, slightly above the International Monetary Fund’s forecast, which tagged China as the only major economy likely to expand this year.

“China’s stimulus has differed from that of much of the region with its focus on the industrial sector and construction, rather than for small and medium-sized enterprises or direct payments to the unemployed,” said Moody’s Analytics economist Xu Xiaochun.

“Thus, China’s rapid recovery is led by goods-producing industries and export shipments.”

Nathan Chow of DBS Bank added that the biggest boost came from investments, especially those driven by the government, while overseas demand has also improved. 

While consumer spending has lagged behind, it is catching up “at least among middle- and upper-income households,” and retail sales are nearing their levels of late 2019, Xu said.

But economists maintained that growth will be modest and driven mostly by production rather than services, adding that lingering uncertainty has led to an increase in savings.

HSBC analysts added in a recent report that China’s recovery has been “highly uneven,” stressing a rebound in the private sector will be “essential for a sustainable economic recovery.”

Economists warned, however, that a sharp rebound is unlikely for Chinese consumer demand given the anxiety surrounding the virus, while global tensions are also weighing on the external market.

Tommy Wu, lead economist at Oxford Economics, said that analysts are still “waiting for signs of a more significant improvement in employment, which will underpin consumption.”

Consumers will remain wary about buying large amounts of goods and services during economic uncertainty, while “the external market is not likely to help the Chinese economy either,” said Raphie Hayat, senior economist at Rabobank.

“China’s tensions with several countries are increasing, while some of its trading partners are experiencing second wave outbreaks of the virus.”

This could boost certain exports such as protective equipment and electronics but the effect will “likely be more than offset by generally weaker external demand,” he said.

Wu said that the pace of recovery is likely to slow in the last three months of the year, as credit to real estate and infrastructure investment decelerates.


China aims for sustained and healthy economic development

Updated 30 October 2020

China aims for sustained and healthy economic development

  • Beijing to let market forces play decisive role in resources allocation, report says

BEIJING: China is targeting sustained and healthy economic development in the five years to 2025, with an emphasis on a higher quality of growth, the Xinhua news agency said on Thursday, citing the ruling Communist Party’s Central Committee.

President Xi Jinping and members of the Central Committee, the largest of the ruling party’s elite decision-making bodies, met behind closed doors from Monday to lay out the 14th five-year plan, a blueprint for economic and social development.

China’s external environment “is getting more complicated,” the agency said, adding, “There is a significant increase in instabilities and uncertainties.”

BACKGROUND

China aims to boost its gross domestic product (GDP) per person to the level of moderately developed countries by 2035, while GDP is due to top 100 trillion yuan ($15 trillion) in 2020.

However, the country’s development was still in a period of important strategic opportunities, despite new challenges, it said.

It added that China aims to boost its gross domestic product (GDP) per person to the level of moderately developed countries by 2035, while GDP is due to top 100 trillion yuan ($15 trillion) in 2020.

China will also deepen reforms and let market forces play a decisive role in resources allocation, the agency said.

China will promote a “dual circulation” model, make self-sufficiency in technology a strategic pillar for development, move to develop and urbanize regions, and combine efforts to expand domestic demand with supply-side reforms, it added.

The “dual circulation” strategy, first proposed by Xi in May, envisages that China’s next phase of development will depend mainly on “domestic circulation” or an internal cycle of production, distribution and consumption, backed by domestic technological innovation.