Economic recovery poised to gain momentum

A worker works on the production line of a textile company in Nanmo township in Hai’an city, east China’s Jiangsu province, Feb. 28, 2022. [Photo/Xinhua]

China’s economic recovery is expected to accelerate in the second half of the year after growth stabilized in May, and the country is expected to keep full-year growth within a reasonable range with more targeted policies and effective, say economists and analysts.

Despite weakening economic activity since March due to a resurgence in domestic COVID-19 cases and changes in the international environment, China is expected to record positive growth in the second quarter and the economy will rebound in the following months with a stimulus package fully taking effect.

Profits by Chinese industrial companies contracted at a slower pace in May as the COVID-19 outbreaks eased and work and production gradually resumed, improving from their peak. decline in April since March 2020, according to data from the National Bureau of Statistics on Monday.

SNB data showed China’s industrial profits fell 6.5% year-on-year in May, compared with the 8.5% decline reported in April. For the January-May period, industrial company profits rose 1 percent year-on-year, compared with a 3.5 percent rise in the first four months of 2022, the NBS said.

Zhu Hong, senior statistician at the BNS, said the improvement in industrial profits was due to the government’s effective measures to contain COVID, resume work and production, and ensure smooth logistics.

Meanwhile, Zhu warned that industrial enterprises still face pressure from rising costs and difficulties in production and operation, and called for more efforts to implement existing policies aimed at stabilize the industrial economy and help companies to overcome their difficulties.

Yin Yue, an analyst at Shanghai-listed Hongta Securities, pointed to the substantial improvement in industrial profits in regions that were badly hit by the pandemic, saying some major economic indicators are expected to return to pre-pandemic levels due from the impact of COVID-19 eases further in the following months.

According to the NBS, the profit contraction of industrial enterprises in Shanghai and the provinces of Jiangsu, Jilin and Liaoning narrowed by more than 20 percentage points from the previous month.

A series of economic indicators improved in May thanks to stronger political support and better control of the pandemic, showing new signs of recovery.

Citing recent data from the SNB, Tommy Wu, senior economist at think tank Oxford Economics, said industrial value-added production and capital investment improved in May after contracting in April, the impact of the COVID-19 having subsided in most parts of China.

“We expect growth to pick up more meaningfully in June after stabilizing in May,” Wu said. “We expect supply chains to normalize in the third quarter, while stimulus measures will play a crucial role in boosting domestic demand in the second half of the year.”

Wu said he expects to see a stimulus-driven recovery in the second half of the year, fueled in particular by infrastructure investment.

“Policymakers have rolled out numerous stimulus measures, including those in the government work report and a new round of 33 measures in May. We expect infrastructure investment to do the heavy lifting to support growth in the second half,” he said. “We still expect a rate cut in the third quarter, as broad-based monetary easing via a rate cut could be effective in boosting growth.”

Zhu Jianfang, chief economist at CITIC Securities, spoke highly of the 33 policy measures taken recently by the government to stabilize the overall economy, saying China’s economy will rebound especially in the second half of the year with such strong policy support.

Despite multiple short-term pressures, Zhu said China will remain the biggest contributor to global economic growth given its potential growth rate of over 5% during the 14th Five-Year Plan period (2021-25 ), an abundant supply of labour. and the country’s key roles in global trade and industrial chains.

Due to stronger policy support to stabilize growth, Zhu said his team expects China’s GDP to grow slightly in the second quarter.

“China is expected to see its GDP grow by around 6% in the third and fourth quarters, and full-year GDP could approach 5% in 2022,” Zhu said in a recent economic outlook report. of China for the second half of this year. .

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