Consumption plays preeminent role in driving China’s GDP growth: Experts

NEW YORK (XINHUA) – Chinese consumers are becoming a driving force for the country’s gross domestic product (GDP) growth again as normalcy is largely back and COVID-19 has been well controlled, said experts with multiple international research and advisory firms.

Consumption will become the main contributor of Chinese GDP growth in the fourth quarter of 2020, overtaking both manufacturing and investment, according to a note by UBS Global Wealth Management.

China’s holiday binge in the first eight days of October bodes well for the fourth quarter, UBS Global Wealth Management’s Chief Investment Officer Mark Haefele said on Friday.

Initial data suggested strength and resilience for Chinese consumption, said Haefele, citing impressive data on cinema box office revenue, duty-free shopping in Hainan province and tourism income.

During the “Golden Week” holiday, retail and catering sales totalled CNY1.6 trillion (about USD239 billion), up five per cent year on year, and tourism generated CNY460 billion of income across the country, according to UBS.

China’s GDP is expected to expand 5.4 per cent year on year in the third quarter, up from 3.2 per cent in the second quarter, according to a recent research note by Bank of America Global Research.

Tourists wearing masks to protect themselves from the coronavirus visit the popular Nanluogu alley area in Beijing. PHOTO: AP

Service sectors continued normalising in the third quarter while the industrial production and construction momentum likely further strengthened, said economists with Bank of America Global Research.

Nominal retail sales could show a year-on-year growth of 1.6 per cent in September, up from 0.5 per cent in August, thanks to continuous recovery of catering demand and solid goods sales, according to Bank of America Global Research.

Chinese economic growth will be sustained by a robust service sector while overall economic momentum is expected to ease back, said a recent report by investment advisory firm MRB Partners.

The service sector is leading the rebound and export growth has been only modest in addition to restrained overall stimulus policies, said partner and strategist with MRB Partners Mehran Nakhjavani.

The above-mentioned factors explain how above-trend overall growth coexist with a flat profile for imports in the last few months, according to Nakhjavani.

The “Golden Week” holiday implies that Chinese economic data in October will show weak aggregates because of fewer working days, while service sector metrics will reflect strong travel and leisure activity, said Nakhjavani.