Experts say consumption plays preeminent role in driving China's GDP growth
Published: Oct 11, 2020 10:25 AM

Tourists view Chishui waterfall in Zunyi City, southwest China's Guizhou Province, Oct. 7, 2020. Noted for its rich history and natural resources, Zunyi City attracts lots of tourists during the National Day and Mid-Autumn Festival holidays. (Xinhua/Yang Wenbin)

Chinese consumers are becoming a driving force for the country's GDP growth again as normalcy is largely back and COVID-19 has been well controlled, said experts with multiple international research and advisory firms.

Consumption will become the main contributor of Chinese GDP growth in the fourth quarter of 2020, overtaking both manufacturing and investment, according to a note by UBS Global Wealth Management.

China's holiday binge in the first eight days of October bodes well for the fourth quarter, UBS Global Wealth Management's Chief Investment Officer Mark Haefele said on Friday.

Initial data suggested strength and resilience for Chinese consumption, said Haefele, citing impressive data on cinema box office revenue, duty-free shopping in Hainan province and tourism income.

Tourists shop at a duty-free shopping mall in Sanya City, south China's Hainan Province, Oct. 5, 2020. Hainan is witnessing a boom in duty-free sales during this National Day and Mid-Autumn Festival holiday. (Xinhua/Guo Cheng)

During the "Golden Week" holiday, retail and catering sales totaled 1.6 trillion yuan (about 239 billion US dollars), up 5 percent year on year, and tourism generated 460 billion yuan of income across the country, according to UBS.

China's GDP is expected to expand 5.4 percent year on year in the third quarter, up from 3.2 percent in the second quarter, according to a recent research note by Bank of America Global Research.

Service sectors continued normalizing in the third quarter while the industrial production and construction momentum likely further strengthened, said economists with Bank of America Global Research. 
Nominal retail sales could show a year-on-year growth of 1.6 percent in September, up from 0.5 percent in August, thanks to continuous recovery of catering demand and solid goods sales, according to Bank of America Global Research.

Aerial photo taken on Oct. 8, 2020 shows passengers preparing to enter Wuhan Railway Station in Wuhan, central China's Hubei Province. Transportation hubs in China are witnessing the peak of return passengers as the eight-day holiday ends on Thursday. China celebrates its National Day on Oct. 1, and the weeklong holiday this year has been extended to Oct. 8 as it overlapped with the Mid-Autumn Festival, a traditional festival symbolizing family reunion that falls on Aug. 15 on the lunar calendar. (Photo by Zhao Jun/Xinhua)

Chinese economic growth will be sustained by a robust service sector while overall economic momentum is expected to ease back, said a recent report by investment advisory firm MRB Partners.

The service sector is leading the rebound and export growth has been only modest in addition to restrained overall stimulus policies, said Mehran Nakhjavani, partner and strategist with MRB Partners.

The above-mentioned factors explain how above-trend overall growth coexist with a flat profile for imports in the last few months, according to Nakhjavani.

The "Golden Week" holiday implies that Chinese economic data in October will show weak aggregates because of fewer working days, while service sector metrics will reflect strong travel and leisure activity, said Nakhjavani.
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