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Image source,Reuters
Speed skating venue for the 2021 Beijing Winter Olympics
On October 19, China’s National Bureau of Statistics announced that the GDP growth rate in the first three quarters of this year turned from negative to positive, a year-on-year increase of 0.7%.
In terms of quarters, the first quarter fell 6.8% year-on-year, the second quarter increased 3.2% and the third quarter increased 4.9%.
Among them, the GDP growth rate in the third quarter was 4.9%, which was lower than market expectations and lower than the estimated median of 5.2% in the Reuters survey.
But in the world’s major economies, China’s economic recovery is still outstanding.
The epidemic remains a widespread drag on the world economy. The International Monetary Fund (IMF) predicts that China will be the only major economy to achieve positive growth this year. Annual GDP is forecast to increase by 1.9%, while the world economy will contract by 4.4%. The World Bank also predicts that China’s economic growth will reach 2% this year.
Weak consumption and rapid growth in online retail
Image source,Reuters
Despite the rapid recovery of China’s tourism industry during the last Golden Week, overall consumption in China remains weak.
Total retail sales of consumer goods are the most direct data representing national consumer demand.
In China’s first three quarters, this data exceeded 27.3 trillion yuan, a year-on-year decrease of 7.2%, and has not yet returned to the pre-epidemic level.
In terms of type of consumption, the restaurant industry was seriously damaged, with revenue of about 2.5 trillion yuan, a drop of 23.9%.
Although China’s overall domestic consumer demand remains weak, China’s online retail sales in the first three quarters exceeded 8 trillion yuan, an increase of 9.7% year-on-year and the growth rate was 2.4 points. percentage higher than that of the first semester of the year.
Both investment and foreign trade turned positive, the real estate sector boomed and the manufacturing industry declined
Besides consumption, the other two wagons that drive the economy —investment and foreign trade— have gone from negative to positive.
In the first three quarters, China’s investment in fixed assets (excluding rural households) was 43.653 billion yuan, a year-on-year increase of 0.8%. The growth rate changed from negative to positive for the first time in the year and fell by 3.1% in the first half of the year.
By sectors, the growth of investment in infrastructure increased slightly by 0.2%. The manufacturing industry is not yet optimistic, with a drop in investment of 6.5%.
Image source,Reuters
The investment stimulated the recovery of the Chinese economy in the third quarter and the growth rate of real estate investment was more evident.
Investment in real estate development was prospering, increasing 5.6%, offsetting the drop in manufacturing. However, China has lessons from the past. The real estate-backed economic downturn is likely to create high-leverage systemic risks. At the same time, high house prices will cause a crowding-out effect on consumption and investment in manufacturing.
With the global epidemic on the rise, China’s foreign trade has also turned from negative to positive.
In the first three quarters, the total import and export volume was 23 trillion yuan, an increase of 0.7% year-on-year. Among them, exports were 12.7 trillion yuan, a year-on-year increase of 1.8%; imports were 10.4 trillion yuan, a year-on-year decrease of 0.6%. Export is better than import.
It is worth mentioning that previously published data showed that China’s foreign trade unexpectedly entered recovery mode, the monthly volume of imports and exports in September reached a new record, with a 13.2% increase in monthly imports and exports of 9.9%.
Highlights and concerns coexist
In recent decades, the GDP growth rate of less than 1% can hardly be considered a success in any economy. However, in 2020, China has gone from negative to positive in the first three quarters, and its performance is striking among countries deeply mired in the epidemic. The growth rate in the third quarter has recovered to 4.9%, reflecting the speed of recovery of the Chinese economy.
Taking a closer look, analysts believe this is a report card of both bright spots and concerns.
“The greater the failure prevention and epidemic control abroad, the more favorable will be China’s economic recovery; China is now in the position of the United States during World War II.” Shanghai Securities macro analyst Hu Yuexiao predicts that the pace of economic recovery in the fourth quarter will increase moderately and the economic growth rate for the full year will be good. Up to 2.1%.
Gao Ming, a macroeconomic analyst at China Merchants Securities, believes the industry’s performance is particularly good, almost one percentage point higher than the agency’s expectations.
Image source,fake images
China Everbright Bank financial market analyst Zhou Maohua said that economic growth in the second and third quarters basically offset the losses in the first quarter and the pace of China’s economic recovery accelerated, boosting confidence in the outlook. of a global economic recovery.
In addition to the bright spots, there are also concerns. Nick Marro, chief global trade analyst at the Economist Intelligence Unit (EIU), believes the consumer outlook is a worrying part of the Chinese economy. “We still need to see stronger evidence of the recovery in domestic consumption to assuage concerns caused by the deterioration in excess industrial capacity in recent quarters.”
“In terms of growth momentum, the transition from investment-driven to consumption-driven is still needed in the later stage.” Bloomberg, a financial derivatives researcher at Founder Interim Futures, believes the investment slowdown in the fourth quarter is a high-probability event. The growth momentum will continue to slow.
Furthermore, the threat of the epidemic to the Chinese economy has not yet been removed. Wang Jun, chief economist at Centaline Bank, believes the recurrence of domestic epidemics in the fall and winter and persistent high foreign epidemics will exacerbate the global economic downturn, which in turn will affect China’s external demand and reduce export performance.
“Exports have helped support the recent growth momentum. However, as the economies of major markets such as the United States and the European Union deteriorate, it may fall in the fourth quarter.” Ma Zhiang further stated that despite the positive news about vaccine research and development in China, it is estimated that the vaccine will not be available before the end of 2021. It will be applied globally, making current expectations be a little gloomy.
“The worst case scenario is that any harmful side effect of the vaccine will damage the positive image of vaccines made in China, and an ineffective vaccine can first give people a false sense of security and then suddenly cause massive infections. This situation it will affect the market. Confidence and economic performance have long-term effects. “
The Economist Intelligence Unit believes that China’s economic growth level in the fourth quarter is difficult to restore the annual economic growth rate to 2%. The agency predicts that China’s real economic growth this year will be around 1.7% -1.9%.
