China economy rebounds in Q2 after virus hit: AFP poll

BEIJING (AFP) – China returned to growth in the second quarter after the coronavirus pandemic handed the world’s second largest economy its first contraction in decades, according to an AFP poll of analysts.

The survey of analysts from 11 institutions pegged China’s growth at 1.3 per cent – a far cry from the 6.1 per cent expansion posted last year but in better shape than other countries still grappling with the contagion.

The coronavirus, which first emerged in China’s industrial central province of Hubei late last year, has shut businesses worldwide and destroyed hundreds of millions of jobs.

But analysts forecast China will be the only major economy to experience positive growth this year – partly because it was first to be hit by COVID-19 and therefore first to recover.

China is expected to post 1.7 per cent growth for the full year, according to the economists surveyed by AFP, compared with International Monetary Fund forecasts of a global contraction.

Analysts forecast China will be the only major economy to experience positive growth this year. PHOTO: AFP

Growth data for the April to June period will be published on Thursday.

The government essentially shut down the country for months to bring the virus under control, halting factory work, keeping workers at home and limiting travel.

But activity has resumed as China largely brought the epidemic under control and ended the lockdown of Hubei and its capital Wuhan in April.

Authorities were able to rein in an outbreak in Beijing last month with very limited restrictions.

Xu Xiaochun of Moody’s Analytics said mass testing and targeted lockdowns in the capital limited economic disruption, giving investors “quiet confidence that China stands ready to prevent a full-blown second wave of infections as the country continues to re-open”.

After the economy sank by 6.8 per cent in the first three months of the year – the first contraction since China began logging quarterly data in the early 1990s – the government has turned its focus to stabilising employment and ensuring living standards.

It raised its budget deficit target and set aside CNY1 trillion (USD140 billion) of government bonds for COVID-19 control, working to prop up businesses hit by the virus fallout.

Oxford Economics’ lead economist Tommy Wu expects China to continue recovering from the second quarter onwards “as it is no longer being held back by supply-side disruptions”, with factories back to life.

Head of China research at the Institute of International Finance Gene Ma said another factor behind recovery is China’s more industrial-based economy.

“Industrial sectors can recover faster than service sectors in the wake of the COVID-19 shock,” Ma said.