- China gets back at a faster pace with its economy building up quite impressively.
- The industrial output rises by 4.8% in the month from a year earlier, the same as in June, but lower than economists’ expectations.
- President Xi Jinping focuses on getting a stable economy that can be more independent amid the broadening confrontation with the U.S.
- The Shanghai share benchmark jumps 15% in the past six months, the most among major global indexes.
A news report published in the Bloomberg written by Chang Shu, reveals multifaceted challenges faced by China and the measures it takes to keep its economy afloat.
China’s industries rebound
After a slump due to the coronavirus, the industry-powered rebound is pushing towards expansion.
China is the only major economy to expand with experts expecting it to grow by 2.0%.
China is reviving, revamping its performance as world needs its goods. As a result the sales have jumped in July as factories and retailers elsewhere re-opened.
Setbacks at a glance
- Obscure data about the full scope of employment post shut-downs.
- Consumer’s mood not so rapid and recovery to falter.
- Trade war between the U.S. and the China can restrain the stimulus of China.
A more solid performance
Overall retail sales fell 1.1%, compared to a projected 0.1% increase. At the same time, the fixed-asset investment was 1.6% lower in the first seven months of the year.
“China’s recovery is largely on track,” said Tommy Wu, senior economist at Oxford Economics Ltd in Hong Kong. “Investment plays a bigger role, where as in the rest of the world fiscal policy support is mainly on the employment and the smaller enterprise front. This explains why China’s economy can gather pace quicker and gain a firmer footing at a relatively earlier stage of the recovery.”
Path to resurrection
- President Xi Jinping pushes for an independent economy.
- President promotes ‘dual circulation’ development model for a self-reliant domestic economy with certain foreign technologies and investment.
- A special focus on investment-led fiscal policy strategy.
The government spends heavily on infrastructure with respect to future oriented technologies.
Some 3.75 trillion-yuan ($540 billion) worth of so-called special bonds is to be issued this year to fund such efforts.
Sales good on a high
Sales of goods turned positive for the first time this year. The sales grows by 0.2% from a year ago with rising auto sales.
The spending on restaurants and catering in July is down by 11%.
That’s even as high frequency readings suggest hotel vacancies are back to January levels and domestic air travel is at 90% of where it was at the start of the year, according to Morgan Stanley.
“Chinese consumers seem to be taking a longer time to come back to normal spending compared to their counterparts in the U.S. and Europe,” said Helen Qiao, chief Greater China economist at Bank of America. With the virus under control, “consumers should benefit from a safer public health environment,” Qiao told Bloomberg Television.
China labor at risk
Sources say unemployment rate is higher than the official report mentioned as 5.7%. The gauge leaves out perhaps half of the workforce that includes those people working as labors from their place of residency registration.
- The graduate job market is weak according to Zhaopin.com the biggest recruiting websites in China.
- Nearly a quarter of Chinese graduates register and look for jobs at present.
- Declining income against higher food prices implies that household spending is under pressure.
“The employment target has become the top priority,” according to Liu Peiqian, a China economist at Natwest Markets in Singapore.
If the recovery does slide, there’s still plenty of fiscal and monetary firepower to fight it. The central bank has so far steered clear of major interest rate cuts and bond buying programs and instead has funneled money to smaller and medium-sized companies.
Bloomberg’s economists say
China’s outlook faces considerable uncertainty from both domestic and external demands. Friday’s weaker-than-expected data has increased the odds of a rate cut by the People’s Bank of China in the coming months, even though the central bank has lately sent signals on policy normalization.
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Source: Bloomberg
