Green Shoots in Chinese Economy Boost Confidence for Global Recovery
Although the coronavirus-battered world economy has not yet got out of the woods, encouraging signs in the Chinese economy have raised hopes that a broad-based recovery is in the offing.
Industrial rebound has been gaining momentum on the ground. The automobile market, hard hit by the pandemic globally, has seen a fast recovery in post-lockdown China, with sales hitting 2.19 million units in May, up 14.5 percent from the same period last year.
Manufacturers related to the auto industry have benefited from this recovery. Florent Menegaux, CEO of Michelin Group, the French tire manufacturer, told Xinhua that Michelin’s three Chinese factories have all resumed production, and its business performance in China is expected to meet its June projections.
As China’s passenger transport and logistics rebounded with the steady resumption of business activities, its oil market is also on track to recovery.
Jim Burkhard, Vice President and head of oil markets at IHS Markit, a London-based global information provider, took the brisk resumption of Chinese oil demand as a welcome signpost for the global economy.
“When you consider that oil demand in China—the first country impacted by the virus—had fallen by more than 40 percent in February—the degree to which it is snapping back offers reason for some optimism about economic and demand recovery trends in other markets such as Europe and North America,” he said in an online note.
Wood Mackenzie, the global energy consultancy group, projected that by the third quarter, China’s gasoline demand would have surpassed the same period last year by 3 percent to 3.5 million barrels per day. Meanwhile, diesel demand could grow by 1.2 percent to 3.4 million barrels per day over the same period.
By the end of April, all major steel-using industries in China had returned to near-full production levels, and the recovery of steel demand will be more visible in the second half of 2020, driven by construction, especially infrastructure investment, the World Steel Association said.
Foreshadowing a construction boom in China, the country’s excavator producers reported robust sales in May, with 25 leading excavator makers selling 31,744 excavators, up 68 percent year on year.
From a broader perspective, official data showed China’s factory activities continued to pick up in May with the value-added industrial output, a key economic indicator, rising by 4.4 percent year on year.
As the pandemic entails contactless and efficient business models, such as virtual offices, online education and telehealth, digital transformation has become another meaningful variable to track how economies recover.
Standing at the forefront of digital infrastructure growth, China is expected to lead the digital economy and inject fresh impetus into the global recovery.
China’s three major telecom operators—china Mobile, China Unicom and China Telecom—plan to build more than 550,000 new 5G base stations this year, bringing the total number across the country to 600,000.
These 5G stations will enable uninterrupted outdoor connectivity in prefecturelevel cities across China, and cover key areas in counties and townships, according to the China Academy of Information and
Communications Technology (CAICT), a government think tank.
Boosted by a solid industrial foundation and evolving commercial products, China’s 5G industry is expected to directly create more than 3 million jobs as of 2025, with 5G-induced aggregate information consumption surpassing 8.3 trillion yuan ($1.17 trillion), a CAICT report noted.
Lim Jock Hoi, Secretary-general of ASEAN, said China is a valuable partner of ASEAN in promoting the development of digital economy in the region, noting that by 2025, ASEAN’S digital economy is expected to grow from 1.3 percent of the GDP in 2015 to 8.5 percent.
The growing optimism about China’s economic recovery has also been backed by the rising consumption enthusiasm in the domestic market.
During a mid-year online shopping bonanza initiated by Chinese e-commerce giants from June 1 to June 18, sales on Jd.com and Tmall.com both shattered records. The combined sales on the two popular platforms came close to a whopping 1 trillion yuan ($141.4 billion). Imported products also saw robust sales.
Noting that China’s economy overall has a good momentum, Zhang Liqing, chief economist of Pricewaterhousecoopers China, said it is important to keep a clear head, as risks of imported cases of infection still loom.
Apart from continued attention to traditional indicators such as fixed assets investment, imports and exports to gauge the health of the Chinese economy, global investors are expected to watch closely government spending and progress in new infrastructure, new urbanization initiatives and major projects, as well as the risks of local government debt, he said.
“China looks like it could be the biggest engine of global GDP growth in 2020 and maybe 2021,” Craig Allen, President of the U.s.-china Business Council, was quoted by The Wall Street Journal on June 14 as saying.
May (y.o.y.)
2.9 tln yuan