Confidence in China’s economic performance turned positive again this month, after three straight months of negative sentiment, as the economy is expected to slowly recover over July as the impact of Covid-19 wanes, according to chief economists polled by Yicai Global.

The Yicai Chief Economist Confidence Index rose to 50.6 for July from 49.8 in June, according to a survey of 18 leading economists in China. A reading above 50 indicates expansion. May’s and April’s figures were 47.6 and 47.8, respectively.

Thirteen economists predicted a 4.3 percent increase in gross domestic product for this year, versus the 5.5 percent set by the government, with 12 believing it will be hard to reach the official target. Seventeen expected second-quarter GDP to have grown by 0.9 percent, far below the first-quarter’s 4.8 percent growth.

New yuan loans likely rose to CNY2.4 trillion (USD359.3 billion) last month, versus CNY1.9 trillion in May, and social financing may have reached CNY4.3 trillion, up CNY1.5 trillion, mainly due to the positive influence of the government’s monetary policy. At 11 percent in June, M2 broad money supply is predicted to have been unchanged from the previous month.

According to the survey participants, a cut in the benchmark deposit rate is unlikely this month. Three economists expect a reduction in the one-year loan prime rate as possible this month, while three others anticipate a cut in the five-year LPR. Three more predicted the possibility of a cut in the reserve requirement ratio for large financial institutions this month.

The survey’s respondents forecast the Chinese yuan to soften versus the US dollar to 6.68 by the end of July from 6.7114 on June 30, but their year-end forecast of 6.63 remained unchanged. This year’s large devaluation of the Japanese yen, which sank 17.5 percent against the dollar from early 2022 to 135.48 on June 7, will not prompt a new financial crisis, and the spillover risks will have a limited impact on China, the economists said.

June’s consumer price index likely rose 2.4 percent from a year earlier, up 0.3 percentage point from May, according to the survey’s results. The producer price index may have fallen 0.4 point to 6 percent.

Retail sales of consumer goods may have dropped 0.9 percent in June from a year earlier, compared with a 7.1 percent plunge the month before, the economists forecast. Industrial added value is likely to have risen 4.1 percent in June, versus a 0.5 percent dip in May.

The economists expected fixed asset investment to have jumped 60.8 percent last month, higher than May’s gain, while the trade surplus was seen falling USD70.7 billion to USD78.8 billion.



Source: Yicai