Chinese GDP grows 7.9% in second quarter, facing downward pressure in second half
China’s GDP grew 7.9% year-on-year in the second quarter of 2021, continuing a robust growth streak mainly thanks to the government’s successful containment of the COVID-19 outbreak across the country, which lays the foundations for a steady recovery of the national economy. consumption and manufacturing activity.
The growth rate offers another signal that the Chinese economy has emerged from the fallout from the coronavirus and returned to pre-virus levels.
But the economy is expected to face increasing downward pressure in the second half of the year, as global commodity price hikes and supply bottlenecks, especially semiconductor chips, may continue unabated. and weigh on manufacturers and consumers alike, while a surge in coronavirus outbreaks overseas will cast a shadow over the economy.
In the first six months, China’s GDP grew 12.7 percent year-on-year to 53.2 trillion yuan ($ 8.22 billion), the National Bureau of Statistics (NBS) said Thursday. In the first quarter, the Chinese economy grew 18.3%, the fastest pace since data began to be recorded in 1993.
During the April-June period, factory output grew 8.9 percent year-on-year while retail sales rose 13.9 percent, according to the NBS.
“China’s economic recovery is rapid and very healthy, because although the government has devoted a lot of resources to stimulating the economy, it also ensures that economic development is balanced, capable of being sustained and that ‘There has been no flood of cash, “Hu Qimu, senior researcher at the Sinosteel Economic Research Institute, told the Global Times.
“China’s economic recovery is a high-quality stimulus, as it has eliminated some redundant and inefficient capacities and improved the country’s overall industrial structure,” Hu said.
Exports remained one of the main drivers of the Chinese economy in the second quarter. Hu said the constant flow of foreign orders to China strongly supports the economy.
“The key to the pink second quarter data was China’s successful control of COVID-19, which boosted the confidence of Chinese companies and motivated them to move from external to internal markets,” said Dong Dengxin, director of the Finance and Securities Institute of Wuhan University, told the Global Times.
Despite several sporadic coronavirus outbreaks, analysts said China’s national vaccination plan has largely restored consumer confidence and helped factories operate stably.
China’s financial policy makers have supported a strong economic recovery, including the extension of some favorable policies put in place in 2020 and the rollout of new policies after the March “two sessions” to support small and micro enterprises .
In the second half of 2021, economic growth will slow compared to the first half – due to a smaller base effect compared to last year – but the economy can still manage to grow by 8% for the whole of the year. year, which analysts said would be a “good recovery.”
Nomura economists led by Lu Ting said in a note sent to the Global Times that their forecast for Chinese GDP growth is expected to slow to 6.4% in the third quarter and 5.3% in the fourth quarter.
Dong said external risks, such as increased inflation in the United States and the resurgence of COVID-19 in Asia and Europe, could erupt in the second half of the year, which could overshadow the world’s second-largest economy. .
Another challenge facing China is that domestic consumption has yet to regain its pre-pandemic levels. “If manufacturing returns to full steam but domestic consumption lags behind, inventories will rise and businesses are likely to face liquidity issues,” Hu noted.
The Chinese government has used political tools to keep the economy from faltering.
Recently, the central bank lowered the reserve requirement ratio of commercial lenders by 50 percentage points, supplying the economy with adequate liquidity and preventing a possible slowdown. The cut went into effect Thursday.
“The political signal sent by the central bank is clear, but whether the effect is as good as expected depends on the actions taken by the lenders, for example whether they will channel more money into the real economy by lending more. small and medium-sized businesses. businesses that need a line of credit the most, ”Dong said.
According to Dong, the central bank will closely monitor the effect of the reserve rate cut and may make another cut before the end of this year. Other measures to stimulate consumption could also be developed in the second half of the year, analysts said.
Beijing sets an annual economic growth target of over 6% for 2021.