Economic Performance in Q1
6.0
6.0 (% y.o.y.)
8.2
8.7 7.2
8.6
9.8
7.6
7.5
7.8
7.2
8.0
8.0
Xu stressed that the rise was mainly generated by the February orders that had piled up. There has been a drop in international orders since April amid the rising uncertainties in the global market. This can weigh on the growth of foreign trade in the second quarter.
According to Zhao, export firms in China have been facing difficulty as orders shrank sharply in Q1. The cancellation of already started projects also led to rising costs and mounting financial risks.
But while declining orders due to weak demand and rising logistics costs are a common problem for enterprises after the outbreak, Mao pointed out that the government has introduced a slew of supporting policies including further tax and fee reductions, cuts in social security contributions and providing financial support.
State support
The People’s Bank of China, China’s central bank, has channeled credit funds into the real economy to boost SMES. It said on April 16 that new yuan loans had reached 7.1 trillion yuan ($988 billion) in Q1, up by 1.29 trillion yuan ($182 billion) year on year. The bank has provided loan support for industries especially impacted by the epidemic, such as retail and transportation.
The epidemic has also not deterred capital flows into the Chinese market. As Wang Chunying, a spokesperson for the State Administration of Foreign Exchange, told a press conference on April 17, foreign investors increased their onshore bond holdings by 48 percent in Q1 from the previous year, an increase of $16.7 billion.
Although the paid-in foreign direct investment (FDI) fell 10.8 percent from a year earlier to 216.19 billion yuan ($30.62 billion) in Q1, inward investment in hi-tech service industries surged 15.5 percent in the period, accounting for 29.9 percent of the total FDI in service sector, the Ministry of Commerce said on April 15.
As the government steps up efforts to ensure the stability of foreign trade and FDI performance, it will further unleash the potential of domestic demand to boost economic growth amid external uncertainties, Mao said.
Since epidemic containment measures kept most people indoors and offline businesses remained suspended in Q1, retail sales of consumer goods, a major indicator of consumption growth, declined 19 percent year on year in the period. However, online sales fell only 0.8 percent year on year. Online sales of physical goods expanded 5.9 percent to 1.85 trillion yuan ($261 billion), accounting for 23.6 percent of total retail sales in the period, according to the NBS.
The prevalence of indoor activities has led to greater use of live-streaming in online sales, with local officials, celebrities and e-commerce platforms making joint efforts to promote sales during the difficult time. On April 6, a live-streaming hosted by China Central Television news anchor Zhu Guangquan and Li Jiaqi, a popular livestreaming host, sold 16 products from Hubei Province in central China, the region most impacted by the epidemic, generating nearly 23 million yuan ($3.2 million) with about 660,000 orders.
As the epidemic is brought under control, the government has introduced measures to encourage offline consumption. Some local governments are offering vouchers to boost spending, and there are incentives to buy new cars, especially new-energy vehicles, to rev up the automobile industry, a pillar of the economy.
The consumer market has shown signs of recovery with the measures since March. According to the NBS, the drop in retail sales in Q1 rebounded slightly from a 20.5-percent decline in January- February. Data from the China Association of Automobile Manufacturers showed that automobile output jumped nearly 400 percent in March from February and sales surged 361.1 percent month on month.
Future outlook
As China rebounds from the virus-induced slump, its economic growth is expected to gain a firm footing amid weak growth across the globe. According to the World Economic Outlook report released by the International Monetary Fund on April 14, China’s economy would grow at 1.2 percent while the global economy may decline by 3 percent this year.
Since the global economic slowdown and difficulties in production resumption are still affecting the Chinese economy, Xu suggests the government hand out cash to lowincome rural and urban residents to boost consumption. It should also issue more special local government bonds to raise capital, reduce corporate income tax to support SMES, and prevent strong rebounds in the property market.
According to Wen, the government can support new infrastructure and the manufacturing industry by further reducing the loan prime rate (LPR) to cut financing costs for the real economy. On April 20, the central bank had already announced it was reducing the one-year LPR to 3.85 percent from 4.05 percent and the above-five-year LPR to 4.65 per cent from 4.75 percent.
Xu remains upbeat about the economic performance in the third and fourth quarters despite external impacts. “China has complete industrial chains, which are a strong backup for its economic recovery. The reliance on foreign trade will decline as domestic demands upgrade,” he said.