Green shoots in Chinese economy boost confidence for global recovery

BEIJING (XINHUA) – Although the coronavirus-battered world economy has not yet gotten out of the woods, encouraging signs of the Chinese economy have raised hopes that a broad-based recovery is in the offing.

Industrial rebound has been gaining momentum on the ground. The automobile market, hard hit by the pandemic globally, has seen a fast recovery in post-lockdown China, with sales hitting 2.19 million units in May, up 14.5 per cent from the same period last year.

Manufacturers related to the auto industry benefitted from this recovery. CEO of Michelin Group Florent Menegaux, the French tyre manufacturer, told Xinhua in a recent interview that Michelin’s three Chinese factories have all resumed production, and Michelin’s business performance in China is expected to meet its June projections.

As China’s passenger transport and logistics rebounded with the steady resumption of business activities, its oil market is also on a track to recovery.

Vice-President and Head of oil markets at IHS Markit Jim Burkhard, a London-based global information provider, took “the brisk resumption of Chinese oil demand” as “a welcome signpost for the global economy.”

Workers at a factory in Tangqi Town, Yuhang District of Hangzhou City, east China’s Zhejiang Province. PHOTO: XINHUA

“When you consider that oil demand in China – the first country impacted by the virus – had fallen by more than 40 per cent in February – the degree to which it is snapping back offers reason for some optimism about economic and demand recovery trends in other markets such as Europe and North America,” he said in an online note.

Wood Mackenzie, a global energy consultancy group, projected that by the third quarter, China’s gasoline demand would have surpassed the same period last year by three per cent to 3.5 million barrels per day. Meanwhile, diesel demand could grow by 1.2 per cent to 3.4 million barrels per day over the same period.

By the end of April, all major steel-using industries in China have returned to near-full production levels, and the recovery of steel demand will be more visible in the second half of 2020, driven by construction, especially infrastructure investment, the World Steel Association said.

Foreshadowing a construction boom in China, the country’s excavator producers reported robust sales in May, as China’s 25 leading excavator makers sold a total of 31,744 excavators, up 68 per cent year on year.

From a broader perspective, official data showed China’s factory activities continued to pick up in May with the value-added industrial output, a key economic indicator, rising by 4.4 per cent year-on-year.

As the COVID-19 pandemic entails contactless and efficient business models, such as virtual offices, online education and telehealth, digital transformation has become another meaningful prospective to track how economies recover.

Standing at the forefront of digital infrastructure growth, China is expected to lead the digital economy and inject fresh impetus into the global recovery.

China’s three major telecom operators – China Mobile, China Unicom and China Telecom – have planned to build over 550,000 new 5G base stations this year, bringing the total number across the country to 600,000.

These 5G stations will enable uninterrupted outdoor connectivity in prefecture-level cities across China, and cover key areas in counties and townships, according to the China Academy of Information and Communications Technology (CAICT), a government think tank.

Boosted by a solid industrial foundation and evolving commercial products, China’s 5G industry is expected to directly create more than three million jobs as of 2025, with 5G-induced aggregate information consumption surpassing CNY8.3 trillion (about USD1.17 trillion), a CAICT report noted.

ASEAN Secretary-General Dato Paduka Lim Jock Hoi said China is a valuable partner of ASEAN in promoting the development of digital economy in the region, noting that by 2025, ASEAN’s digital economy is expected to grow from 1.3 per cent of GDP in 2015 to 8.5 per cent.

The growing optimism about China’s economic recovery has also been backed up by the rising consumption enthusiasm in the domestic market.

During a mid-year online shopping bonanza initiated by Chinese e-commerce giants from June 1 to June 18, sales in and both shattered records. The combined sales in the two popular platforms came close to a whopping CNY1 trillion. Imported products also saw robust sales.

Noting that China’s economy is overall on a good momentum, Chief economist of PwC China Zhang Liqing said it is important to keep a clear head, as risks of imported cases of COVID-19 infections still loom.

Apart from continued attention to the traditional indicators such as fixed-asset investment, imports and exports when they gauge the health of the Chinese economy, global investors are expected to watch closely government spending and progress in new infrastructure, new urbanisation initiatives and major projects, as well as the risks of local government debt, he noted.

“China looks like it could be the biggest engine of global GDP growth in 2020 and maybe 2021,” President of the United States (US)-China Business Council Craig Allen was quoted yesterday by The Wall Street Journal as saying.