BEIJING: A confluence of high inflation, low growth and rising financial fragility may be painting a gloomy picture of the world, but the steady recovery of China’s economy is proving to be a silver lining, experts say.
The US economy has reported economic contraction on an annualised basis for two consecutive quarters this year. This, they noted, rendered the world’s largest economy into a so-called technical recession.
In contrast, the Chinese economy grew 2.5% year-on-year (y-o-y) in the first half in spite of unexpected shocks from Omicron outbreaks and geopolitical tensions.
In July, the country’s industrial output expanded by 3.8% y-o-y, generally stable compared with 3.9% in June, pointing to a continuous momentum in economic recovery, according to the National Bureau of Statistics.
What is even more encouraging is that China’s growth story is expected to continue. International investment banks and asset managers said they expect China’s economic growth to accelerate to about 4% in the second half and above 3% for the whole year.
Notably, such growth would not be a consequence of aggressive stimulus campaigns that could turn out to be heavy debt burdens in the long term.
Instead, China’s growth in the second half, experts said, will be underpinned by reviving demand in its strong domestic market, moderate stimulus measures, and efforts for high-quality development, including innovation and green development.
The country’s cautiousness in launching aggressive stimulus and its commitment to high-quality development even amid difficulties will set the stage for steady economic growth in the coming couple of years, injecting robust momentum into the world economy, they said.
“The Chinese economy has started to recover from the Covid-19-related restrictions. This might be one of the very few bright spots in the global economy right now,” said Wang Qian, Vanguard’s Asia-Pacific chief economist.
Wang said the US-based investment company expects China’s economic growth to accelerate to about 4% y-o-y in the second half, compared with 2.5% in the first half.
The country’s full-year economic growth may stand between 3% and 4%, she said, thanks to accelerated infrastructure investment, recovering consumer activity and accommodative macroeconomic policies.
Wang, however, said China’s economic recovery is not without risks amid a global economic slowdown, which could mean weaker demand for China’s exports of manufactured goods. Moreover, the economy also faces the challenges of Covid-19 uncertainties and a real estate downturn.
Data from the General Administration of Customs showed that China’s export growth in dollar terms remained buoyant in July at 18% y-o-y, demonstrating the resilience of China’s industrial chain.
The growth, nevertheless, could fall to single-digit numbers in the coming months due to a higher comparison basis, souring global demand and fading high export prices, meaning that the country should avoid counting exports as the main driver of economic recovery, experts said.
They further said efforts to boost domestic demand, especially fixed-asset investment, are instead expected to bring the advantage of China’s vast domestic market into further play and act as the key for the Chinese economy to register stable growth amid intensified external uncertainties.
“Given the growing recession risks facing the world economy, especially in Europe and the United States, China’s economy may feel the pressures of weakening external demand,” said Cheng Shi, chief economist at ICBC International.
“Effectively expanding (domestic) investment will be crucial for China to fend off the external risks,” Cheng said, adding that fiscal policy may play a major role in boosting investment while monetary policy is expected to continue structural support for businesses and residents’ living conditions. — China Daily/ANN
