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.


Fishing rights top Brexit talks agenda

Updated 30 November 2020

Fishing rights top Brexit talks agenda

  • A no-deal scenario is widely expected to cause economic chaos

LONDON: Last-ditch Brexit trade talks continued in London on Sunday with fishing rights remaining an “outstanding major bone of contention,” according to British Foreign Minister Dominic Raab.

EU chief negotiator Michel Barnier told reporters that “work continues, even on a Sunday,” as he arrived for the second day of talks.

Barnier had arrived in London on Friday following a spell in self-isolation after a member of his team contracted coronavirus and ahead of the resumption of talks with British counterpart David Frost on Saturday.

Both men warned that a deal could not be reached without major concessions from the other party.

There are only five weeks to go until the end of the current transition period, during which trade relations have remained largely unchanged.

The two key sticking points remain post-Brexit access to British fishing waters for European vessels and the EU’s demand for trade penalties if either side diverges from common standards or state aid regulations rules.

Raab told Sky’s Sophy Ridge on Sunday that this could be the final week of “substantive” talks, with time running out to agree and ratify a deal.

“There’s a deal to be done,” he said.

“On fishing there’s a point of principle: As we leave the EU we’re going to be an independent coastal state and we’ve got to be able to control our waters,” he added.

Barnier told envoys last week that London was asking that European access to UK waters be cut by 80 percent, while the EU was willing to accept 15 to 18 percent, according to a Brussels source.

A British official called the demands “risible,” according to the domestic Press Association, adding that the “EU side knows full well that we would never accept this.”

“There seems to be a failure from the Commission to internalize the scale of change needed as we become an independent nation,” said the source.

However, Raab was cautiously optimistic over the “level playing field” issue, saying “it feels like there is progress toward greater respect” for Britain’s position.

A failure to reach an agreement would see Britain and the EU trading on World Trade Organization terms, with tariffs immediately imposed on goods traveling to and from the continent.

As it stands, Britain will leave Europe’s trade and customs area on Dec. 31, with no prospect of an extension.

A no-deal scenario is widely expected to cause economic chaos, with customs checks required at borders.

Concern is particularly acute on the border between EU member Ireland and the British province of Northern Ireland, where the sudden imposition of a hard border threatens the delicate peace secured by 1999’s Good Friday Agreement.

The talks have already dragged on much longer than expected and time is running out for ratification of any deal by the European Parliament by the end of the year.