Coronavirus: can China’s economy rebound in 2020 second quarter with the rest of the world still in trouble?

09-Apr-2020 Intellasia | South China Morning Post | 6:02 AM Print This Post

Private economists have begun to echo Beijing’s forecast of a second quarter economic rebound, despite doubts over the strength of recovery while the rest of the world is still grappling with the spread of the coronavirus pandemic.

China is expected to suffer a contraction in the first quarter for the first time since the end of the Cultural Revolution in 1976, heaping pressure on the government to steady the economy and ensure the country’s growing unemployment problem does not get worse.

A second quarter bounce back would also leave the door open, if only a crack, for the Chinese Communist Party to achieve its goal of doubling the size of gross domestic product (GDP) between 2010 and 2020 a target that analysts estimate would require a minimum growth rate of 5.6 per cent for the full-year.

The economy’s performance in the second quarter the period from April to June will be crucial for the government to get the economy back on track, analysts at Citic Securities, the country’s largest brokerage, wrote in a research note published on Tuesday.

“The second quarter might be an important turning point, as there will be a significant rebound of economic activity from the first quarter,” Citic analysts Zhu Jianfang and Cheng Qiang said. “In the third and fourth quarters, the headline economic growth rate could return to the normal track of 6 per cent or higher.”

A quick rebound could be expected because of the “countercyclical policies”, or pro-growth measures, already taken by Beijing, Zhu and Cheng said.

Their forecast reflected the official narrative among Chinese policymakers. Chen Yulu, vice-governor of the People’s Bank of China, said last month that economic indicators were expected to significantly improve in the second quarter, with growth quickly returning to potential.

Even as the coronavirus paralyses global consumption and trade, President Xi Jinping has said China is committed to attaining its “social and economic development goals” for 2020, although he has not elaborated on what these are.

While most private economists generally agree there would be a turnaround in the second quarter, there is still debate about how strong the rebound will be.

Louis Kujis, head of Asia economics at Oxford Economics, said China would see “basically no growth” in 2020 even though there would be a recovery in coming months.

Li Xunlei, chief economist at brokerage Zhongtai Securities, said in a note on Monday that China’s economic recovery had become bogged down by a series of bottlenecks in recent days, as new data on coal consumption and public transport traffic showed growth in activity had slowed.

Chen Wenling, chief economist at Beijing-based China centre for International Economic Exchanges, said it was now “impossible” for the country to reach the 5.6 per cent GDP growth rate needed to double the size of the economy over the past decade.

Growth will fall short of the target “because the international market has such a big impact on China,” she said at an online forum last Tuesday.

China’s return to normal economic activity has been unbalanced so far, with most industrial enterprises and construction sites resuming work, but small businesses, service providers and exporters struggling to get back on their feet.

Tourism spending during the three-day Ching Ming grave-sweeping festival, which ran last Saturday to Monday, plunged 80 per cent compared to the same period last year, the China Tourism Academy said on Tuesday.

The International Monetary Fund said on Monday China’s recovery has been “encouraging”, although there was still “huge uncertainty” over the future path of the pandemic and its global economic impact.

China’s official manufacturing purchasing managers’ index rebounded above 50 in March, indicating growth in the sector. But the National Bureau of Statistics cautioned the result only showed the situation was better than February’s dismal performance, when the index hit a record low, and did not mean manufacturing had returned to normal.


Category: China

Print This Post