GDP likely to grow 2-3% in Q2: economists

By GT staff reporters Source: Global Times Published: 2020/7/9 20:43:40

Nation’s factory activities show steady recovery in June

Aerial photo taken on June 1, 2020 shows the Drum Tower and night markets in its surroundings in Kaifeng, central China's Henan Province. The night-time economy in Kaifeng has begun to revive as the city's evening businesses gradually reopen with the easing of COVID-19 restrictions. (Xinhua/Li An)

China's GDP in the second quarter is believed to have returned to positive growth, said analysts and financial institutions, predicting that the growth rate is expected to reach 2-3 percent year-on-year, backed up by quick recovery of the manufacturing sector and services.

In the latest sign of recovery, China's producer price index (PPI), a gauge of factory inflation, improved by 0.4 percent in June from May, though it still dropped 3 percent compared to the same period last year.

Although it was the fifth consecutive monthly fall since February, the narrowing decline in PPI is an indicator of the overall resumption and the stable recovery of China's manufacturing industry, Tian Yun, vice director of the Beijing Economic Operation Association, told the Global Times Thursday.

"China's manufacturing and exports have been hit hard since the coronavirus crisis began. The recent slowing of the decline shows a mild improvement in demand in the international market. And China's manufacturing sector, which is already beginning to recover, will benefit further," Tian said.

However, as the coronavirus is still spreading in the US and many of China's other trade partners, the PPI is expected to remain in negative growth in the months to come, Tian said.

With a recovery in the manufacturing sector, China's GDP is expected to start expanding again, and might record a growth rate of 2-3 percent in the second quarter, Dong Dengxin, director of the Finance and Securities Institute at Wuhan University of Science and Technology, told the Global Times Thursday.

A customer shops at a supermarket in Beijing on Thursday. Economic data showed that China's consumer price index rose by 2.5 percent year-on-year in June, picking up from May's 2.4 percent and in line with forecasts. Photo: cnsphoto

 Dong's estimate is in line with a forecast from Goldman Sachs, who predicted China's GDP in the second quarter could rise 2 percent.

"As global demand starts to recover, the fundamentals for exports are improving though overseas producers are resuming production too. Medical exports likely remained strong. Export growth may show some improvements at the margin and its year-on-year growth can potentially turn positive on a low base," Goldman Sachs said in a statement it sent to the Global Times.

However, Dong said that uncertainties, such as the pandemic situation overseas and strained China-US ties will be a major barrier in the recovery of the country's exports and the overall economy in the next half year.

"Our domestic orders have mostly recovered so far, but we still see no signs of recovery in foreign orders," Zhao Cheng, owner of an auto parts firm in Nantong, East China's Jiangsu Province, also a supplier of Volkswagen, told the Global Times Thursday.

Dong stressed the difficulties lie in the country's job market - China's official urban surveyed unemployment rate remained near a historic high in May at 5.9 percent. 

"The problem is that many graduates are staying at home due to fewer desirable job opportunities, and many export-oriented small- and medium-sized firms stop hiring and are very conservative about expansion," he said.

This is why the central government has released a list of measures to stimulate domestic consumption and encourage more export-oriented firms to turn to a domestic focus, Dong said.

June economic data also showed that China's consumer price index (CPI) rose by 2.5 percent year-on-year in June, picking up from May's 2.4 percent and in line with forecasts. 

Food prices will remain at a low level in the next half, which paves the way for the release of more macroeconomic policy, said Liu Xuezhi, an economist at the Bank of Communications, noting that the central government could provide more "targeted support measures" to those hit hard by the pandemic, and strengthen efforts to expand domestic demand in all sectors.


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