China’s economic growth indicators are ‘lopsided,’ analyst says

07-Aug-2020 Intellasia | CNBC | 6:02 AM Print This Post

China’s economic growth indicators are lopsided, pointing to possible downside risks for the country in the second half of 2020 as it tries to recover from the coronavirus pandemic, an analyst said Thursday.

“On Covid, the Chinese deserve a lot of credit. They certainly locked down much of the country,” said Andrew Collier, managing director at Orient Capital Research, a Hong Kong-based research firm.

“Even though they may have launched the virus, they were pretty good at quelling it. That’s the advantage of an authoritarian regime,” he told CNBC’s “Squawk Box Asia.”

The coronavirus was first reported in China late last year, prompting the government to shut down more than half of the country as part of its efforts to contain the virus. China has since been trying to bolster its soft power by trying to take the lead in a global response to the public health crisis as US infections soar and those in the Asian country fall.

Recent data showed China’s June retail sales fell 1.8 percent from a year ago, much worse than the 0.3 percent growth analysts forecast in a Reuters poll. That came after a 2.8 percent drop in May.

But that was still better than sharp drops in the rest of the world, said Collier.

“The problem with the stimulus measures and the economic indicators is that it’s very lopsided… it’s very focused on online sales and also on infrastructure build,” he said.

Steel and iron ore production have been strong in China, “but nobody can quite figure out where all these metals are going,” he said, as auto sales have been rather weak even if the raw materials are going to the construction of infrastructure and property.

“There is some suspicion there’s a lot of stockpiling,” said Collier.

He said tensions between the US and China are “worrisome” with President Donald Trump seeming to use Secretary of State Mike Pompeo as a way to reignite hostilities toward Beijing as the president falls behind in the polls. But, investors will likely shrug this off, Collier said.

“It is quite true that Trump is a bit of a paper tiger at this point… A lot of what he does is more flash than actual changes and it doesn’t look like they are going to rewrite the script on the US-China trade relation, so there probably is going to be more noise than it is actual reality,” said Collier.

Senior US and Chinese officials are reportedly expected to review the implementation of their phase one trade deal next week.

Collier said he would keep his eyes on actual supply and demand.

“The bigger issue is whether the stockpiling of oil and the stockpiling of steel and iron ore is related to actual demand or whether this is just priming the pump to keep the economy going,” he said.

Should there be less demand than supply for such commodities, what could happen in the rest of 2020 is that demand for commodities will drop off. But there is also an upside if the retail sector continues to do better than the rest of the world, he said.

“There is likely to be some downside risk in the second half, but on the other hand, China is doing better than the rest of the world in terms of Covid,” said Collier.


Category: China

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