【COVID-19】宗良：中国经济可望实现V型复苏下的持续增长 - 2020-09-28

The Government Work Report of this year did not set goals for economic growth. Against the backdrop of great uncertainties at home and abroad, if the goals are set too high, it will be difficult to achieve; if too low, it’s of little significance. Therefore, it is better to set no goals, leaving more room for economic policies to exert influence. As the country first hit by the Covid-19 and took the lead in recovering economy in the second quarter, China’s overall economic conditions exceeded market expectations. In the fourth quarter of 2019, China’s GDP growth rate was 6%. In 2020, the GDP dropped by 6.8% in the first quarter due to the impacts of the epidemic but grew by 3.2% in the second quarter. China’s economy showed a clear V-shaped recovery, meaning that the economic activities quickly rebounded after hitting the bottom. China has generally controlled the impacts of the epidemic on its economy.
Firstly, most of the major indicators rebounded after bottoming out in the second quarter, demonstrating the resilience and potential of China’s economy. Confronted with the heavy impacts of the epidemic and severe challenges in internal and external environments, the CPC Central Committee and State Council has adopted a series of macro policies to facilitate epidemic prevention and control, and resumption of production and work, ensuring the stable operation of macroeconomic and financial markets. The introduction and implementation of measures to ensure stability on the six fronts and maintain security in the six areas have significantly mitigated the huge impacts on the society and people’s livelihood. In the second quarter, the economy achieved steady performance with gradually stabilizing supply and demand, and restored confidence of various sectors, which is a testament to the strong resilience of China’s economy and the superiority of its system.
The decrease in fixed asset investment significantly narrowed from -16.1% for the first quarter to -3.1% for the first half of 2020. The total retail sales of consumer goods registered a smaller year-on-year decline for 4 consecutive months, and the export value was on the rise for 3 consecutive months. Employment and prices were generally stable, the Renminbi exchange rate was steadily rising, and the significant increase in the stock market indicated that most investors were optimistic about the economic outlook. In particular, the emerging fields gathered momentum. In the first half of 2020, the added value of high-tech manufacturing grew by 4.5% year on year, with its proportion of industrial added value rising to 14.7%, an increase of 0.9 percentage points from the same period of last year. The online retail sales of physical goods increased by 14.3% year on year, accounting for 25.2% of the total retail sales of consumer goods.
Secondly, people’s livelihoods have been well protected. We have made remarkable achievements in poverty alleviation, which is a miracle in human history. According to the data from the National Bureau of Statistics, the nominal increase of per capita disposable income for rural residents in Sichuan, Guizhou and Guangxi with a large poor population was between 5.5% and 7.6% in the first half of the year. Social security guarantees and other assistance continued to improve, and per capita transfer income increased by 8.2% in nominal terms. Specifically, the per capita retirement pension grew by 9.3%, while per capita social relief and subsidy income increased by 13.2%. People’s consumption for basic living maintained rapid growth. In terms of the retail sales of units above designated size, grain, oil and food increased by 12.9% year on year, and daily necessities increased by 5.2%.
Thirdly, the fundamentals of China’ s long-term economic development remain unchanged. In terms of external demand, the global economy has yet to recover, and resumption of work and production is still underway in Europe and America, bringing opportunities for China’s industrial exports. China’s recent export has been underpinned by its relatively complete industrial categories, solid manufacturing foundation, and anti-epidemic supply. As for domestic demand, the main driving force of economic growth lies in domestic demand, while investment in infrastructure and real estate also plays a significant role.
(Dr. Zong Liang, Chief Researcher at Bank of China)