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20 Jul 2020

Econ Digest

Effective prevention and control of the COVID-19 pandemic drives 2Q20 China’s economy up by 3.2% YoY…China will resume domestic tourism to support the consumption and employment of more than 28 million people

The Chinese economy reverted to a growth of 3.2 percent YoY in 2Q20, versus the 6.8 percent YoY contraction reported for 1Q20, thanks to the government's effective measures in combating the coronavirus (COVID-19) pandemic, thus allowing economic activity in the country to return to normalcy. Its industrial production resumed a 4.8 percent YoY growth in June, against the 8.4 percent contraction recoded for 1Q20. Exports grew slightly by 0.14 percent YoY in 2Q20 after shrinking 13.4 percent YoY in 1Q20, attributable to short-term factors resulting from soaring shipments of pharmaceutical products, medical supplies, and equipment such as medical masks, in a situation where the COVID-19 pandemic is still severe in many countries.

Looking into 2H20, China's easing of guidelines to allow travel agents to sell domestic tour packages again will likely help reinvigorate domestic consumption and boost employment in the tourism industry, such as the accommodation and hotel sectors, which employ more than 28 million people. However, there is no explicit recovery sign in Chinese exports during 2H20 amid the persistent weakness seen in global demand.

Due to a more positive trend foreseen in the Chinese economy during 2H20, KResearch expects that China’s GDP growth may improve over the 1.8 percent YoY contraction reported for 1H20, driven primarily by private consumption. For the full year of 2020, KResearch maintains our growth forecast for the Chinese economy at 1.0-3.0 percent (annualized growth) because there are numerous downside risks that may put pressure on its recovery, in particular geopolitical risks between China and the US.

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Econ Digest