China is growing again

The Chinese economy returned to a growth path in the past second quarter with great momentum. The gross domestic product increased by more than eleven percent compared to the previous quarter, thus fully offsetting the roughly ten percent slump at the beginning of the year. The pre-crisis level of economic output was restored and growth of 3.2 percent was achieved compared with the second quarter of 2019. That is remarkable.

However, the recovery is not balanced. The industry was able to quickly resume production after the comparatively short corona lockdown in February and has now almost returned to normality. With its high share of around 40 percent, it has decisively stabilised the overall economy. Private consumption, on the other hand, continues to stumble, weighed down by people’s fears of job and income losses and of a second wave of infection. For this reason, the state has had to provide decisive stimulus for economic growth in recent months. Although Beijing’s economic stimulus measures have so far had an almost modest effect by international standards, they have apparently been implemented very promptly or may even be much higher than the officially announced 4.2 percent of GDP. In any case, government investment activity has picked up significantly in recent months.

The Chinese economy also received an unexpected boost from foreign trade, with exports remarkably resilient to the global economic downturn. Chinese industry benefited from the fact that it was already able to produce and deliver again when the lockdown was only just imposed in many parts of the world. Not only medical protective equipment was shipped in bulk around the world, but also production components for supply chains previously damaged by China’s lockdown. This enabled the People’s Republic to significantly increase its market share in numerous industrialized countries. In the meantime, many exporting countries are also benefiting from the rising demand from China. Imports rose significantly in June, with raw material imports in particular rising sharply.
Despite this positive development, the coming months are likely to be difficult for the Chinese economy. The growth spurt of the corona loosening will soon come to an end. The recent gains in market share in the country’s most important export markets are also unlikely to be permanent once production in the industrialised countries returns to normal. At the same time, the collapse in demand caused by the global recession is likely to have a greater impact. In addition, the ongoing conflict with the United States remains a high risk to growth. Even if the dispute is currently tending to escalate to the political level, it could quickly lead to trade barriers again. We therefore remain cautious in our forecast. It will probably be some time before China can return to the growth trend of the past year.

Rate this article

Thank you for your rating. Your vote:
There is no rating yet. Be the first! Current average rating: 1.00

Leave an answer

Your e-mail address will not be published. Required fields are marked *