China: More and more signs of recovery

 

In most areas of the Chinese economy, signs of recovery now predominate. Not only do the survey results now signal growth again, but the „hard“ economic indicators have also turned to a recovery path. Industry has returned to its pre-crisis level and has been in the black since April. Even a slight increase in profits has now been reported. The retail sector has at least narrowed the gap to last year, at least noticeably, to which the strong sales of car dealers in recent weeks have contributed in particular. In fact, they were able to completely make up for their 80-percent decline from February. There is thus much to suggest that the figures on economic growth in the second quarter, which China will publish in about two weeks‘ time, will be good. Compared to the previous year, there should be a slight increase again, which would correspond to a rise of up to nine percent compared to the disastrous previous quarter.

So, everything back to normal in the country of origin of the pandemic? Certainly not! After this initial catch-up effect, the economic recovery should continue to be much bumpier. Consumers remain unsettled, as the sharp drop in consumer confidence shows. Many Chinese are struggling with loss of income and jobs. Added to this is the fear of a second wave of infection, not only among the population but also among the political leadership. This has been demonstrated by the renewed corona outbreak at a Beijing wholesale market and the harsh action taken by the authorities. Regionally limited lockdowns could therefore continue to occur in the second half of the year. And finally, the severe global recession should soon unleash its full braking effect on China’s foreign trade, not forgetting the US president, who is anxious about his re-election and is already threatening to impose sanctions on bilateral trade. China’s economic recovery could thus find itself in even stormier waters.

China’s economy will probably only stagnate this year. However, this means that the second-largest economy will still be one of the very few countries that will not have to cope with a decline in economic output this year compared with 2019. China will therefore remain an important stabilizing factor for the global economy.

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