China’s economy saw growth returning in the second quarter, and more support was needed to recover


BEIJING (Reuters) – China’s economy is likely to return to modest growth in the second quarter following a record contraction, as lockdown measures ended and policymakers raised stimulus to counter the shock from the coronovirus crisis.

A worker wearing a face mask after an outbreak of coronovirus disease (COVID-19) works at a construction site on July 16, 2020 in Beijing, China. REUTERS / Carlos Garcia Rollins

As of early Thursday, gross domestic product (GDP) numbers will be watched closely around the world, especially as many countries continue to grapple with the COVID-19 epidemic, even as China largely controls the outbreak Has managed and has begun to reoccur. Economic Engine.

Analysts estimating GDP by Reuters raised GDP estimates by 2.5% in April-June from a year earlier, a 6.8% drop in the first quarter – the first contraction since at least 1992 when the official quarterly GDP record started.

However, the expected growth rate would still be the weakest expansion on record.

Increasing chronovirus infections in some countries, including the United States, have increased demand for improved Chinese exports, while heavy domestic job losses and sluggish health concerns have kept consumers cautious.

China’s service sector, which is dominated by small companies, has not returned as quickly as factory production, although there are some signs that consumer confidence is slowly improving.

On a quarterly basis, GDP grew by 9.6% in April-June, down 9.8% in the first quarter.

Data on Tuesday showed that the country’s imports rose for the first time in June this year as demand for building materials increased as a stimulus, while exports also closed as foreign economies.

Although China’s economy is steadily improving, an uphill battle is still ahead as the situation remains grim both at home and abroad, state radio quoted Premier Li Keqiang on Monday.

With second quarter GDP figures on Thursday (0200 GMT), China will also release June factory production, retail sales and real estate investment.

DEBT RISKS

Central bank Governor Yi Gang has said China will maintain enough liquidity of the financial system in the second half, but will need to consider withdrawing support at some point, raising questions among investors when it starts dialing incentives Can do.

Analysts say the rise in credit risk is a matter of concern for policy makers.

Ruan Jianhong, head of the central bank’s statistics department, told a briefing last week that China’s macro leverage ratio increased by 14.5 percentage points in the first quarter and further increased in the second quarter.

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Nevertheless, analysts expect policymakers to maintain support for the economy for some time, to ensure that the recovery remains on track, especially given the fragile global economic conditions.

Credit growth is also expected to remain strong. The new bank loan set a record 12.09 trillion yuan ($ 1.72 trillion) in the first half of the year.

The International Monetary Fund has projected to expand by 1.0% of China’s GDP for the full year, the only major economy to report growth in 2020.

Reporting by Kevin Yao; Editing by Sri Navratnam

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