Some bad news regarding China’s economy has recently made the “China collapse” commentators excited. For example, a township bank in Nanjing had financial problems and might not allow customers to withdraw money. In addition, there have been incidents of unfinished buildings in many places, and some small owners have launched rights protection and want to collectively cut off the supply.
The world has undergone drastic changes. The persistent epidemic, soaring energy prices, soaring inflation, interest rate hikes in the United States, and the US dollar soaring, coupled with the outbreak of the epidemic in the mainland once in April and the real estate correction, have indeed hit China’s economy to a certain extent. However, the latest economic figures show that China’s economy is quite resilient.
The National Bureau of Statistics released China’s national economic figures for the first half of this year on July 15. In the first half of the year, China’s gross domestic product (GDP) grew by 2.5% year-on-year. China’s growth in the first half of this year was mainly dragged down by the second quarter. In the first quarter of this year, the growth rate was 4.8% year-on-year. However, the growth rate in the second quarter plummeted to only 0.4%, dragging down the performance of the first half of the year.
Fu Linghui, a spokesman for the National Bureau of Statistics, said that due to the impact of the epidemic, major economic indicators fell sharply in April, and the country launched a basket of economic stabilization policies, held a national teleconference, and deployed work to stabilize the economy. The decline in major economic indicators narrowed in May, and the economy stabilized and rebounded in June. The economy achieved a positive growth of 0.4% in the second quarter.
The economic impact of the country’s fight once morest the epidemic can really be described as a war. Seeing that the epidemic had stabilized in May, the country immediately took all measures to keep economic growth from falling into negative numbers in the second quarter. As a result, it successfully maintained a positive growth of 0.4%.
The country set a target of 5.5 percent economic growth this year at the beginning of the year, when no outbreak was expected. The epidemic broke out in April, and foreign institutions have significantly lowered their growth forecasts for China’s economy. For example, the rating agency Standard & Poor’s lowered China’s economic growth this year to 4.2% in May, and then lowered it to a mere 3.3% growth in June. This is the second time in two months that China’s economic growth forecast has been downgraded.
I estimate that China’s economic growth for the whole year of this year should be higher than the 3.3% forecast by S&P, mainly because the Chinese economy will rebound in a retaliatory manner in the third quarter, and the fourth quarter will maintain a relatively high growth rate, but to achieve An annual growth of 5.5% is extremely difficult.
Yao Yang, dean of the National Development Institute of Peking University, believes that in order to achieve the annual growth target of 5.5% set at the beginning of the year, at least 7.8% growth is needed in the second half of the year to ensure the annual growth rate of 5.5%. But the rate of 7.8% greatly exceeds the potential growth rate of China’s economy, which is 6%. Unless the economy rebounds as strongly in the second half of this year as it did in the second half of 2020, it will be very difficult to achieve this speed. If the economy reaches a potential growth rate of 6% in the second half of the year, the annual growth rate will be around 4.5%.
I think China’s economic growth can reach a figure of 4.5%. There are several main reasons:
First, China’s exports will be much stronger than estimated. China’s General Administration of Customs announced that China’s exports in June increased by 17.9% year-on-year in U.S. dollars, far exceeding market expectations of 12.5%. The trade surplus in June hit a record high of US$97.94 billion, bucking the trend of other major industrial countries.
2. The industrial production in the Mainland has rebounded steadily, and the high-tech industry and manufacturing industry have developed rapidly. The added value of industrial enterprises above designated size in the second quarter increased by 0.7% year-on-year, of which, it decreased by 2.9% in April, turned to an increase of 0.7% in May, and increased by 3.9% in June.
Third, release water to stimulate the economy. As inflation in the mainland is not high, the latest June inflation rate was only 2.5%, unlike the US and Western countries where inflation was as high as 8% or 9%, so China still has room to release water to support the economy. Taking June as an example, the growth rate of broad money supply M2 was 11.4%, a high level in recent years. It shows that the grandfather has stepped up his efforts to promote the economy of the valley.
The conclusion is that if the central government does more efforts to flexibly control the epidemic and support the property market, the annual growth rate may exceed 4.5%. Those who sing regarding China’s economic collapse every day are just wishful thinking.
