Can the "top students" pass the "mid-term exams" for China's economy?

(Mid-Year Economic Observation) Can the Chinese economy of "top students" pass the "mid-term exam"?

　　China News Service, Beijing, July 8 (Reporter Wang Enbo) The 2021 "progress bar" has passed halfway. According to the plan, Chinese officials will release core economic data such as GDP growth in the first half of July in mid-July.

Faced with a variety of uncertainties at home and abroad, can the Chinese economy, a "top student" in the process of global recovery, deliver a satisfactory "mid-term exam" answer?

　　As the only major economy in the world to achieve positive growth in 2020, entering 2021, China's economy will achieve a good start with a year-on-year GDP growth rate of 18.3% in the first quarter.

Throughout the first half of the year, despite the more complicated external environment, China's exports achieved higher-than-expected growth in the context of accelerated recovery of the global economy and tight supply, which played a major role in boosting the economy.

　　From the perspective of the internal environment, in the face of the local and repeated challenges of the domestic epidemic, China has steadily promoted the overall planning of epidemic prevention and control and stabilized economic growth, accelerated vaccination, maintained continuity and stability in macroeconomic policies, and partly reduced the burden, stabilized jobs, and expanded employment. Extension to the end of the year, the economy continued to maintain a stable recovery trend, and the job market was generally stable.

　　However, after starting with a rare double-digit high growth rate, in the second quarter, the growth rate of China's major economic indicators including industrial production, investment, and consumption fell back from a high level.

Does this mean that the momentum of economic recovery has weakened?

　　Wen Bin, chief researcher of China Minsheng Bank, believes that due to the impact of the new crown pneumonia epidemic, China’s main economic indicators have experienced negative growth since February last year, leading to a sharp jump in the year-on-year growth rate of related indicators in February this year. The year-on-year decline in growth rate is also an inevitable trend.

In his view, the current overall Chinese economy continues to recover steadily, which is basically in line with expectations.

　　"China's economic recovery is faster than other major economies in the world," said Ding Shuang, chief economist of Standard Chartered Greater China and North Asia. By calculating the compound annual growth rate of the past two years, the distortion effect caused by the low base can be eliminated. Judging from the two-year average growth, China's economy has entered a growth range of 5% to 6% since the fourth quarter of last year, which is consistent with China's potential growth rate calculated by many institutions.

　　It is especially worth noting that with the continuous recovery of consumption and non-real estate investment, the uneven recovery of some sectors and industries in China's economy has improved since the beginning of this year.

　　Standard Chartered Bank’s research shows that from the perspective of the compound annual growth rate in the past two years, in May, China’s retail sales of consumer goods accelerated from 4.1% in the first quarter and 4.3% in April to 4.5%, reflecting the increase in residents’ income. With the recovery of growth and the improvement of the job market environment, consumer confidence has increased.

　　The study also pointed out that the current number of newly confirmed cases of new coronary pneumonia in China remains low. Facts have proved that the Chinese government has the ability to contain the spread of the new crown virus through precise prevention and control measures and reduce the negative impact of the epidemic on the economy.

Against this background, in May, the average growth rate of China's service industry's value added in the past two years accelerated from 6.2% in April to 6.6% year-on-year, and the average growth rate of the industrial sector's value-added in the past two years fell from 6.8% in April to a normal level. 6.6%.

　　Wang Tao, head of economic research at UBS Asia and chief China economist, judged that considering the fading of the base effect, most economic indicators such as China’s exports in the second quarter may have weakened year-on-year. It is expected that the actual growth rate of China’s GDP in this quarter may slow to Around 8%, but the growth momentum will be significantly stronger than in the first quarter.

　　On the whole, all parties have basically reached a consensus on the "mid-term exam" answer sheet that reflects the steady recovery of the Chinese economy.

In the second half of the year, can this momentum continue?

　　In Ding Shuang's view, effective control of the epidemic is the biggest favorable factor supporting China's economic recovery.

He mentioned that China's new crown vaccination doses have exceeded 1.3 billion. With the continuous increase in the vaccination rate and the more mature prevention and control measures, the economic impact of each round of repeated epidemics is marginally reduced.

　　The Bank of China Research Institute predicts that in the second half of the year, China's consumption and investment growth will continue to improve, and the supporting role of domestic demand will further increase, but the growth rate of external demand may slow down. This "rising and falling" will determine the overall trend of China's economic growth.

At the same time, we must pay close attention to external uncertainties such as the unsynchronized global epidemic prevention and control, the uneven economic recovery, and the expected warming of the Fed's monetary policy.

　　Wang Tao also pointed out that the year-on-year growth rate of China's exports may slow down in the second half of the year, but the global economy is expected to pick up sharply this year, and China's supply chain is resilient, which will provide certain support to export activities.

In addition, benefiting from the continuous improvement of corporate revenue and confidence, high capacity utilization, and continuous credit policy support, corporate capital expenditures should be able to rebound further.

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