BEIJING (Reuters) – China’s economy is likely to return to modest growth in the second quarter after a record contraction, as the closure measures ended and politicians increased stimulus to combat the shock of the coronavirus crisis.
Workers in facial masks, after the outbreak of coronavirus disease (COVID-19), work at a construction site in Beijing, China, on July 16, 2020. REUTERS / Carlos Garcia Rawlins
The gross domestic product (GDP) numbers, which expire early Thursday, will be watched closely around the world, especially as many countries continue to grapple with the COVID-19 pandemic, even as China has managed to contain the outbreak and has started to restart its Economic Engines.
Analysts polled by Reuters forecast that GDP had grown 2.5% in April-June from the previous year, reversing a 6.8% decrease in the first quarter, the first contraction since at least 1992 when official records began quarterly GDP.
However, the expected growth rate will continue to be the weakest expansion on record.
The rise in cronavirus infections in some countries, including the United States, has overshadowed the increased demand for Chinese exports, while heavy domestic job losses and lingering health concerns have kept consumers cautious.
China’s service sector, which is dominated by smaller companies, has not recovered as fast as factory production, although there are some signs that consumer confidence is gradually improving.
Quarterly, GDP is expected to have grown 9.6% in April-June, compared to a 9.8% decrease in the first quarter.
Tuesday’s data showed that the country’s imports in June increased for the first time this year as the stimulus increased demand for construction materials, while exports also increased as overseas economies reopened after the blockades. .
While China’s economy is showing a steady recovery, a tough battle still remains as the situation remains dire both at home and abroad, Prime Minister Li Keqiang was quoted as saying by state radio on Monday.
Along with second-quarter GDP data on Thursday (0200 GMT), China will also release June factory output, retail sales and investment in fixed assets.
DEBT RISKS
Central bank governor Yi Gang said China would maintain liquidity in the financial system in the second half, but should consider withdrawing support at some point, raising questions among investors about when the stimulus could start to shrink.
According to analysts, an increase in debt risks remains a concern for policy makers.
Ruan Jianhong, head of the central bank’s statistics department, said in a briefing last week that China’s macro leverage ratio rose 14.5 percentage points in the first quarter and rose further in the second quarter.
Still, analysts hope that policymakers will continue to support the economy for a longer time to ensure that the recovery takes its course, particularly given the fragile global economic conditions.
Credit growth is also expected to remain strong. New bank loans hit a record 12.09 trillion yuan ($ 1.72 trillion) in the first half of the year.
The International Monetary Fund forecast that China’s GDP will expand 1.0% for the full year, the only major economy expected to report growth in 2020.
Reporting by Kevin Yao; Editing by Shri Navaratnam
.
