The Strategist

China's GDP shows 3.2% growth in Q2

07/17/2020 - 07:14

The National Bureau of Statistics of the PRC published a portion of data for June and GDP for the second quarter: the indicator increased by 3.2% in annual terms after falling by 6.8% in January-April. The acceleration was primarily driven by an increase in industrial production, while retail sales in June showed a decline again. However, experts point out that such rates of recovery will not last long, and new US sanctions due to the situation around Hong Kong may worsen the situation.

China's GDP in the second quarter of this year showed growth. In annual terms it increased by 3.2% after falling by 6.8% in January-March, the Bureau of National Statistics of the People's Republic of China reported (growth in the second quarter compared to the first quarter was 11.5% ). The indicator turned out to be significantly higher than expected. The official forecast for this year was not published, the IMF earlier lowered its forecast for China's economic growth for this year by 0.2 percentage points, to 1%, the World Bank gave a similar estimate. Now these estimates are likely to be revised.

The volume of industrial production in the PRC in June increased by 4.8% yoy against an increase of 4.4% in May. At the same time, retail sales in China unexpectedly fell 1.8% in June after falling 2.8% a month earlier. Investments in fixed assets in China in June increased by 5.4% against 3.9% in May, while unemployment fell to 5.7% from 5.9% a month earlier.

“The Chinese economy has avoided entering a technical recession, but the current growth cannot be considered sustainable,” says ING Bank, which, however, predicted a 3.1% decline in GDP in the second quarter.

Capital Economics notes that growth was observed in the industrial sector and construction, while the service sector is recovering more slowly. “For now, it looks like a V-trajectory, but the growth rate will slow down in the second half of the year,” the center expects.

Markets have not shown growth in response to the published data as they are worried about a quarrel between the US and China over Hong Kong. Recall that on June 30, the Chinese authorities adopted the Hong Kong National Security Law, which gives the authorities of the special territory broad powers to fight protests. The United States, in turn, passed the Hong Kong Autonomy Act, which allows the administration to impose new sanctions on Chinese officials.