CAUTIOUS REBOUND
GDP expands 3.2% in second quarter
China reports forecast-beating Q2 economic growth after Q1’s record contraction.
BEIJING: China saw forecast-beating economic growth in the second quarter after a record contraction in the previous three months, as businesses cautiously returned to normality following strict lockdowns across the country.
The figures released yesterday follow a string of data showing the world’s second-biggest economy slowly emerging from the outbreak, and should provide hope to other governments looking to get back on track from a crisis that has likely caused a global recession.
Gross domestic product expanded 3.2% in April-June, the National Bureau of Statistics said, smashing expectations and a massive improvement on the 6.8% contraction in the first quarter.
However, in a sign that full recovery could take time, retail sales — a key indication of consumer sentiment in the world’s second-largest economy — fell short of forecasts, shrinking 1.8% on-year in June.
That suggests people remain reticent about going out to spend even as the virus appears largely under control in China.
“No matter how much stimulus and fiscal sugar you try to entice consumers with, they will not leave their apartment and go on a spending spree until they feel confident the landscape is virus-free,” said AxiCorp strategist Stephen Innes.
The retail sector has taken on an increasingly crucial role in China’s economy as leaders look for consumers, rather than trade and investment, to drive growth.
There is an even greater need for a pick-up in domestic consumption as China’s external demand weakens, but Innes noted it was easier to normalise supply than demand.
Louis Kuijs of Oxford Economics said household consumption remained the “weakest link” among indicators, although China’s economic upturn was expected to continue in the second half of 2020.
Economists warn of uncertainty ahead owing to an uneven recovery — growth in infrastructure investment has rebounded, but private fixed-asset investment and retail sales remained weak.
The coronavirus, which first emerged in the city of Wuhan late last year, has since shut businesses and destroyed millions of jobs globally.
The growth reading, while beating the 1.3% growth tipped in an AFP poll of analysts, is still among China’s lowest quarterly growth rates on record.
The economy contracted 1.6% onyear in the first six months, the NBS said, while the urban unemployment rate dipped to 5.7% in June, from 5.9% a month earlier.
Unemployment is a closely-watched marker, with nearly nine million graduates expected to enter an uncertain labour market this year and analysts saying the actual jobless rate is likely higher, especially when China’s huge floating population of migrant workers is taken into account.
Industrial production grew 4.8% in June, in line with expectations and up from 4.4% in May.
NBS spokeswoman Liu Aihua told a news conference yesterday that China’s economy “demonstrated a momentum of restorative growth and gradual recovery”.
But with the pandemic still ravaging many of China’s key trading partners, national economic recovery was “still under pressure”.
China is expected to be the only major economy to see growth in 2020, being the first hit by the virus and to bounce back.
Economists warn, however, that official economic figures should be taken with a grain of salt, with longstanding suspicions that growth data is massaged upward for political reasons by the Communist Party that has based its legitimacy on delivering continued prosperity.
“Is it too good to be true?” ING chief economist for Greater China Iris Pang asked, telling AFP that more data were needed.
She also pointed to risks down the road including trade and tech tensions with other major economies, particularly the United States, as well as recent major flooding in parts of China.