Xinhua Silk Road - Belt and Road Portal, China's silk road economic belt and 21st Century Maritime Silk Road Website Xinhua Silk Road - Belt and Road Portal, China's silk road economic belt and 21st Century Maritime Silk Road Website
Subscribe CustomBlackClose

Belt & Road Weekly Subscription Form

download_pop

Research ReportCustomBlackClose

The full edition of the report is available at Xinhua Silk Road Database. You can click the “Table of Content” to have a general understanding of it.

Click on the button below to create your account and get immediate access to thousands of articles.

Start a Free Trial

Xinhua Silk Road Database
Economy

Spotlight: China's economic recovery offers encouraging precedent for world

October 22, 2020


Abstract : China's accelerating economic recovery from the COVID-19 pandemic could continue in the fourth quarter and provide encouraging insight into the post-COVID-19 economic picture, according to investment advisory experts.

NEW YORK, Oct. 21 (Xinhua) -- China's accelerating economic recovery from the COVID-19 pandemic could continue in the fourth quarter and provide encouraging insight into the post-COVID-19 economic picture, according to investment advisory experts.

"The latest encouraging economic data from China at the start of this week gives us an insight into the recovery in store when a vaccine is developed and the outbreak is contained," Mark Haefele, chief investment officer with UBS Global Wealth Management, said Monday.

China reported 4.9 percent of year-on-year GDP growth in the third quarter of this year, up from 3.2 percent in Q2 and -6.8 percent in Q1.

While some investors find it hard to look beyond rising cases and fresh localized lockdowns amid the second wave of COVID-19 infections across the West to consider an economic recovery, "China's recovery offers an encouraging precedent for the rest of the world," said Haefele in a research note.

The return of Chinese oil demand to pre-COVID-19 levels also puts some investors' assumption that global oil demand would have permanent changes into question.

"If the idea that permanent demand issues will persist from COVID-19 is proven wrong, then we think the market is going to be very wrong-footed for 2021," said HFI Research on Monday.

Chinese economic rebound continued to broaden in Q3 and the latest growth figure accelerated the V-shaped recovery even as it missed the consensus forecast of 5.5 percent, Haefele noted.

China's outlook has been revised up to a growth of 1.9 percent for 2020 because of a faster-than-expected rebound in Q2, and growth is expected to pick up to 8.2 percent in 2021 on the assumption of a smooth handover from public sector support to private sector demand, said a regional economic outlook report issued by the International Monetary Fund (IMF) on Wednesday.

By contrast, the IMF used to forecast that China's GDP would grow 0.9 percent in June, with another forecast of 0.7 percent in April.

Going forward, both external and domestic demand will boost China's industrial production growth, while consumer demand on services see some further improvement, pushing Chinese GDP growth to pre-COVID-19 level of close to 6.0 percent year on year in the fourth quarter, said Helen Qiao, Greater China Chief Economist with Bank of America Securities, on Monday.

China's GDP growth in Q4 will continue to be driven by domestic demand, supported by favorable employment trends, Mehran Nakhjavani, emerging markets strategist with MRB Partners, said on Monday.

Moreover, a sequenced approach of exiting lockdowns that prioritizes essential sectors and reopen regions based on forward-looking assessments can reduce the economic costs of lockdowns while minimizing health risks, said the IMF, citing China's experience.

The strength of China's Q3 GDP growth is mostly driven by domestic economic activities, with the recovery in the service sector playing an important role, Nakhjavani told Xinhua.

Chinese total retail sales of consumer goods in Q3 posted year-on-year expansion of 0.9 percent, up from -3.9 percent in Q2 and -19 percent in Q1, according to China's National Bureau of Statistics.

China has seen a gradual recovery in private non-housing investment and consumption following a boost from infrastructure, real estate investment and a surge in exports, said the IMF in the report.

August and September also recorded a pickup in China's exports, which is congruent with the recovery in economic demand and therefore imports from China in major global economies, said Nakhjavani. He added this pickup was reflected in relatively strong Chinese exports and imports.

A deep-dive into the data showed that the recovery in Q3 was driven largely by net exports and investments while China's domestic consumption also picked up, said Haefele.

Haefele noted while retail sales growth continued to lag, data over the Golden Week holiday in October suggested that consumers have also become more confident about spending.

Nakhjavani said this external component will be challenged in Q4 by the renewed pandemic-related partial lockdowns rolling through a number of major global markets, in particular in Europe.

Compared with Q3, the trade sector will provide less firepower for China's GDP data in Q4, according to Nakhjavani.

Chinese economic data in Q3 and September showed industrial recovery was in full steam, but it would take time for service sectors to make a strong comeback, Qiao said. Enditem

Scan the QR code and push it to your mobile phone

Keyword: China economic recovery

Reading:

​China enhances financial support to AI industry

Economic Watch: China's employment market perks up during golden job-hunting season

China publishes quality standards for geo-authentic TCM herbs

Interview: Sri Lanka to gain from Chinese trade, investment, says diplomat

China Focus: From Peru to China, fluffy alpaca dolls pave way for prosperous life

Write to Us belt & road login close

Do you want to be a contributor to Xinhua Silk Road and tell us your Belt & Road story? Send your articles to [email protected] and share your stories with more people.

Click on the button below to create your account and get im http://img.silkroad.news.cn/templates/silkroad/en2017te access to thousands of articles.

Start a Free Trial

Ask Us A Question belt & road login close

If you have any questions, please enter them in the box below.

Identifying code Reload

Write to Us belt & road login close

Do you want to be a contributor to Xinhua Silk Road and tell us your Belt & Road story? Send your articles to silkroadweekly@xinhua.org and share your stories with more people.

Click on the button below to create your account and get im http://img.silkroad.news.cn/templates/silkroad/en2017te access to thousands of articles.

Start a Free Trial