The expert expects growth in the second half of the year

by Liang Chen

This year, recurring virus outbreaks and unexpected changes in the external environment have created many challenges for the Chinese economy. However, in the context of effectively controlling the epidemic, Xu Hongcai (deputy head of the economic policy department of the China Political Science Association) is optimistic that the Chinese economy will rebound and will see further growth in the second half of the year, despite ongoing great pressure.

Politicians put the highest priority on “stability”

“This year’s government work report states that the most important aspects of the” sixfold stabilization “and the” sixfold guarantee “are to support market participants to promote market action and thus ensure a sufficient level of employment. An important prerequisite for ensuring stable market participants is the constant prevention and control of diseases. Therefore, we need to optimize the institutional disease prevention and control mechanism and create a well-functioning supply chain. This way we solve the crux of the problem, ”said Xu Hongcai.

An employee works at a machine manufacturing company in Tangshan, Hebei Province, November 17, 2019.

The effect of providing production and support to market players is already beginning to show: from January to May, large industrial companies – that is, with sales of at least 20 million yuan – recorded significant increases in profits. This would show clear signs of stabilization.

“At the moment, however, the basis for repairing industrial enterprises is not yet firm, and the repair of various industrial sectors is still uneven and uncoordinated. Cost pressures on private companies and small and medium-sized enterprises (SMEs) in the middle and downstream industrial chains remain high. Therefore, it is very important to further strengthen the confidence of market participants, explained Xu.

In May, the Chinese state council unveiled a stimulus package with 33 measures, including an increase in tax breaks by more than 140 billion yuan, which this year will bring total tax breaks and tax cuts to 2.64 trillion yuan. In addition, the three-contribution deferral policy (such as pensions) was extended until the end of the year for small, medium and micro enterprises, sole proprietorships and enterprises in five sectors particularly affected. In addition, these measures have been extended to even more sectors. It is expected to save companies of 320 billion yuan throughout the year.

Xu stressed that all these initiatives would help companies reduce costs and overcome individual difficulties. Therefore, it can be said that these are effective actions supporting market participants and increasing the employment rate. As economic stabilization measures continue to have an impact, the recovery of the Chinese industrial economy is expected to accelerate even further in the third quarter of this year.

The recovery of the Chinese economy is expected in the second half of the year

According to Xu’s analysis, the Chinese economy is expected to continue to recover despite many challenges. As a result, gross domestic product (GDP) growth may stabilize and pick up again in the third and fourth quarters, showing a V-shaped trend later in the year. The reasons for this vary.

First, there is still potential for increased consumption. China’s GDP per capita has now exceeded $ 12,000, and diversified, higher-quality consumer demand will continue to grow in the future, giving birth to many new industries and services. This, in turn, will create new investment opportunities.

Secondly, the structure of foreign trade is constantly being optimized. Over the past two years, exports from China have repeatedly exceeded the expectations of the market, disturbed by the pandemic, becoming a key driver of economic growth. Even in the first half of the year, exports continued to exceed expectations. According to the statistics of the General Customs Administration, the total value of Chinese imports and exports of goods in the first half of the year amounted to 19.8 trillion yuan – up 9.4 percent. more than year to year. Of this, exports accounted for 11.14 trillion yuan, an increase of 13.2 percent.

In addition, the industrial structure was further modernized. The development of the Chinese digital economy deserves special attention in this context. Digital technologies are now increasingly used in traditional industries – from smart (‘smart’) transport and smart cities to smart elderly care, healthcare and culture. The increased use of digital technologies is expected to make a decisive contribution to re-fueling the economy.

In light of these events, Xu Hongcai predicts: “China’s efforts to stabilize domestic growth will continue to gain momentum in the second half of the year and the economy is gradually recovering. As effective coordination of epidemic prevention and control, as well as economic and social development, continue to produce results, and macroeconomic policies will continue to have an impact, I believe that stabilization of the entire economy is possible. That’s why I expect the Chinese economy to rebound and continue to grow.

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