6 minute read
Post-Pandemic Economic Recovery and New Market Space in China
On July 16, the National Bureau of Statistics released economic data for the second quarter and the fi rst half of 2020. According to a preliminary calculaঞ on, China's GDP in the fi rst half of the year was RMB 45.66414 trillion, represenঞ ng a year-on-year decline of 1.6% in the fi rst half of 2020 based on comparable prices. On a quarterly basis, it fell 6.8% in the fi rst quarter and grew 3.2% in the second. In the second quarter, the economic growth rate turned posiঞ ve and reached 3.2%, a fair growth considering the impact of the COVID19 pandemic. In terms of investment, from January to June, fi xed asset investment (excluding rural households) nationwide reached RMB 28.1603 trillion, down 3.1% year-on-year and 3.2 percentage points less than that from January to May. Private investment in fi xed assets reached RMB 15.7867 trillion, down 7.3% or 2.3 percentage points. In terms of consumpঞ on, the total retail sales of consumer goods reached RMB 3.352.6 trillion in June, down 1.8% year-on-year (down 2.9% a[ er deducঞ ng the real price factor), a decline narrowed by 1.0 percentage points than that of the previous month. Of this amount, retail sales of consumer goods other than automobiles amounted to RMB 2.9914 trillion, down 1.0%. From January to June, the total retail sales of consumer goods reached RMB 17.2256 trillion, down 11.4% year-on-year. Industry conঞ nued to recover in the second quarter. I n June, the value added of the industrial enterprises above designated size increased by 4.8% in real terms year-on-year, 0.4 percentage points faster than that of May. From a month-on-month perspecঞ ve, the value added of the industrial enterprises above designated size increased by 1.30% in June over the previous month. From January to June, the value added of the industrial enterprises above designated size fell 1.3% year-on-year. Foreign trade has picked up. I n renminbi terms, exports rose 4.3% in June from a year earlier, the third consecuঞ ve month of posiঞ ve year-on-year growth. In dollar terms, exports rose 0.5% in June from a year earlier, a posiঞ ve change from -3.3% in May. On the import side, in renminbi terms, imports rose 6.2% in June from a year earlier, compared with -12.7% in May. In dollar terms, imports rose 2.7% in June from a year earlier, compared with -16.7% in May and -6.8% a year earlier. According to the data, China's economic recovery in the second quarter was reasonably good, which is more opঞ - mistic than the market had expected. Both industrial added value and foreign trade showed posiঞ ve growth. However, consumption and investment remain weak, with consumpঞ on growth remains a concern, and private investment growth has fallen more than the overall rate, indicaঞ ng that business condiঞ ons remain poor. What these fi gures shown are within expectaঞ on; a[ er the pandemic, China's economy is at a set pace of slow recovery. I ndustrial producঞ on, in parঞ cular, has been signifi cantly promoted by the resumpঞ on of work and producঞ on policy. From the perspecঞ ve of China's current and future economy, the notable issue is consumpঞ on. China is a production-oriented country, but consumption growth in
Advertisement
recent years has become the most important pillar of the economy. In 2019, fi nal consumpঞ on expenditure contributed 57.8% of GDP growth, higher than total capital expenditure by 26.6 percentage points. Judging from the data in the fi rst half of the year, domesঞ c consumpঞ on is gradually recovering, but the pace is sঞ ll slow (-1.8%). If the impact of the pandemic is brought under control, consumpঞ on is expected to return to posiঞ ve growth in the second half of the year. Unlike investment, which has immediate eff ect, the culঞ vaঞ on and growth of consumpঞ on is a long-term work, which cannot become a new support for the Chinese economy a[ er the pandemic in the short term. It is precisely because the development of consumpঞ on is a slow process that we must take a long-term view. China must focus on c onsumpঞ on now and conঞ nue to do so. Only in this way can consumption support China's economy in the future. During the pandemic this year, the central government of China emphasizes the domestic-international "dual circulaঞ ons". With the deterioraঞ on of the external economic and geopoliঞ cal environment, China has taken promoঞ ng the "internal citculaঞ on" as the main direcঞ on of economic development. Researchers at ANBOUND believe that to promote the economic "internal circulaঞ on" is to fi nd new impetus to support China's economy in the new economic environment of anঞ -globalizaঞ on. How can China fi nd new i mpetus for its economy? In the past, China have focused on the development of export processing industries, economic development zones and "railway infrastructure" in the southeast coastal areas. In recent years, the focus has shi[ ed to technological innovation, urbanization, consumption and the "new infrastructure". But frankly, none of this is enough to support new growth for China right now. Chan Kung, a scholar at ANBOUND, suggests that China should rethink the geo-economic value of the "Y angtze River Economic Belt" and make adjustments in the strategy of development, spaঞ al arrangement and ঞ ming of development in the overall "inward" development strategy in the future. Chan Kung b elieves that the key strategy beyond the environment for China's economic development is: to resume the construcঞ on of Yangtze River Economic Belt on the basis of high standards environmental protecঞ on; to promote economic development in the west of the Yangtze River Economic Belt; and to build a balanced economic space along the Yangtze River Economic Belt to hedge the huge impact of external environment change on China's economy. These key strategies will help balance China's economic growth, expand consumption space and drive consumption growth, while promoting and achieving a healthy economic and social transformaঞ on in China. Esঞ mates by ANBOUND show that the GDP added value gap between the east and west ends of China's Yangtze River E conomic Belt is about RMB 12 trillion. However, the development gap also brings policy space. Once China achieves basic balanced development at both ends of the Yangtze River Economic Belt, the market space in China's central and western regions will burst into a huge momentum of development. Once the market of western regions is fully developed, its added value of GDP in three years is expected to be almost equal to the total size of the local government debt in China. This will provide an eff ecঞ ve soluঞ on to the troublesome local government debt problem. The development space and potenঞ al are huge and the prospects are promising. It is an important to develop the Y angtze River Economic Belt in a new way in the context of the deterioraঞ on of the external economic environment and the expiration of the period of the internal massive policy easing. To put it simply, the proposal of developing the Yangtze River Economic Belt is to expand internal demand from a geostrategic perspecঞ ve. Today, China is facing situaঞ ons such as anঞ -globalizaঞ on, containment, fl ood, internal circulaঞ on, consumpঞ on, etc. Can China's consumption problem be solved without creaঞ ng new market space? Can excess capacity be absorbed? The big push for B elt and Road Iniঞ aঞ ve in the past few years has been to seek outside market space. Whereas, the restart of the development of the Yangtze River Economic Belt is to open up domesঞ c market space. This is a new space worthy of serious consideraঞ on by decision-makers.
Final analysis conclusion:
C hina's economy slowly recovered amid the pandemic, revealing an urgent need for new market space. Large-scale resumpঞ on of the construcঞ on of the Yangtze River Economic Belt is an effective way to expand the future market space.
