"Serious stimulus": what is the reason for the record growth of business activity in China

Business activity in China's industrial sector peaked in the past three years.

In November, the corresponding PMI rose to 52.1 points, according to the State Statistics Office of the PRC.

The value was the highest since September 2017.

Moreover, the indicator of business activity in the non-manufacturing sector of the Asian republic reached 56.4 points.

The last time a similar level could be observed back in mid-2012.

Traditionally, the PMI index reflects the real state of a particular industry.

A reading above 50 points indicates a positive economic situation, below 50 points indicates a stagnation in the sector.

The Chinese economy is recovering steadily from a sharp weakening at the end of winter.

So, in February, against the background of the introduction of quarantine measures and the massive closure of enterprises due to the coronavirus pandemic, the PMI indices of the industry and the non-manufacturing sector decreased to their lowest levels for the entire observation period - 35.7 and 29.6 points, respectively.

The economic recovery in the PRC is largely due to the actions of the Chinese government to combat the COVID-19 pandemic.

Alexey Maslov, Acting Director of the RAS Institute for Far East Studies, spoke about this in a conversation with RT.

According to him, the republic's authorities have begun to stimulate the domestic market through significant cash injections into the country's financial system, as well as the provision of soft loans and tax breaks.

“Retail trade received serious stimulation, due to which not only the previously closed shops and enterprises began to recover, but also new ones were opened.

It became clear that China had indeed emerged from the epidemiological and economic crisis.

Perhaps now it is the only country that has resolved this issue primarily through government measures, ”Maslov said.

Note, according to official data, from January to February 2020, retail sales in China fell by more than 20% compared to the same period in 2019.

In March, the decline in the indicator slightly slowed down - to 15.8%, and in July the decline was only 1.1%.

At the same time, in August, the volume of retail sales in the country increased slightly - by 0.5%.

In September, growth accelerated to 3.3%, and in October - to 4.3%.

“The authorities have allocated large loans at low interest rates and with a long-term repayment period - from five to seven years.

In addition, new infrastructure construction has begun in a number of regions of the PRC, where a large number of new materials and technologies have been attracted.

In addition, China has created a number of new special economic zones, where taxes have been zeroed, and enterprises are supported by loans and the allocation of start-up capital, ”added Alexey Maslov.

As the head of the analytical department of AMarkets Artyom Deev told RT, since the beginning of the pandemic, Chinese banks have increased the volume of lending to enterprises by 40%.

According to him, it was decided to extend some of the business support measures until the end of 2023.

In particular, we are talking about a moratorium on the payment of VAT on income for private entrepreneurs, as well as small and micro-enterprises.

“The most important thing is that the PRC government did not allow a serious increase in unemployment, took measures to curb inflation and ensured growth in the population's income.

Domestic demand did not fall at the same rate as in European countries or the United States.

As a result, businesses supported by liquidity infusion are showing optimism, ”Deev added.

Raw material support

It is curious that in 2020 the PRC may become one of the few countries whose economy will demonstrate growth.

This is evidenced by the forecast data of the International Monetary Fund (IMF).

According to the organization, by the end of the year, the GDP of the Asian republic will add 1.9%, and in 2021 it will rise by 8.2% at once.

A noticeable revival of activity in China may have a positive effect on the indicators of the world and Russian economies, Artem Deev believes.

As the expert noted, the PRC remains the largest consumer of raw materials in the world.

Against this background, the steady growth of industrial indicators in China will accelerate the restoration of trade ties between the Asian republic and its partners.

“In this regard, it is the close ties between Moscow and Beijing that will trigger the recovery of the domestic economy.

Already now, the PRC is increasing its purchases of natural gas and oil, and in the future it is about the fact that due to the confrontation with the United States, China will increase purchases of other Russian goods and products.

As a result, the trade turnover between our countries can reach the pre-crisis level much faster, ”Deyev said.

According to the General Customs Administration of the PRC, from January to October 2020, Russian-Chinese trade turnover decreased by only 2.3% and amounted to $ 88.2 billion. At the same time, Russia was able to bypass Saudi Arabia and became the largest oil supplier to China.

Mikhail Kogan, head of the analytical research department of the Higher School of Financial Management, spoke about this in an interview with RT.

“In general, for ten months of 2020, China has increased imports of Russian oil by 13.8% - up to 71.26 million tons. In turn, the supply of raw materials from Saudi Arabia to China increased by 2% - to 69.5 million tons. Commodity market participants note an active recovery in oil demand in Asia. This is what allowed the sellers of raw materials to compensate for the decline in consumption of hydrocarbons in Europe, ”Kogan stressed.