China’s economy to thrive in second half with virus under control
Illustration: Chen Xia/Global Times
While an overwhelming and growing majority of Americans say the US economy is headed in the wrong direction, crippled by soaring inflation and shrinking US consumer wallets, China’s economy is firing on all cylinders. now to offset the slowdown or bump in April and May’s numbers, as coronavirus shutdowns in Shanghai and parts of Beijing, Shenzhen and other megacities caused a major drop in economic activity.
June and the first half of this month showed that the world’s second largest economy is rebounding rapidly. In June, the Chinese juggernaut’s export machine showed its full force again, as outbound shipments rose 17.9% to $331 billion, the fastest pace of growth in the first six months with the easing of restrictions related to COVID-19. The purchasing power of Chinese consumers also rebounded from June, giving new impetus to the economy. The economy will prosper in the second half of 2022.
In order to achieve annual GDP growth of more than 5% in 2021, the Chinese central government has launched a package of monetary and fiscal stimulus measures, including tax exemptions and rebates, additional government bond sales premises and a reduction in prime lending benchmark rates. (RPL). In addition, the government has decided to free up the economy through a series of deregulation measures, while further opening the country’s financial markets to foreign capital.
China’s GDP grew 2.5% in the first half of 2022, the country’s statistics authority said on Friday. Achieving the 5.5% growth, preset at the National People’s Congress (NPC) in March, will not be easy, as the world faces myriad uncertainties, ranging from the unabated global spread of variants of coronavirus, to searing inflation and economic contraction in the United States and nearly every other major economy, as well as heightened geopolitical tensions and severely disrupted global supply lines of fuel, grain, fertilizer and semi- drivers.
However, China is blessed with a hard-won advantage – low inflation, thanks to the country’s abundant supply of agricultural products, vegetables, fruits, eggs and pork in particular. The massive supply of cheap labor has helped bolster the country’s giant manufacturing industry, which is able to keep the prices of many manufactured goods down.
In addition, China achieved a large external trade surplus – $97.94 billion in June alone – which largely dampened the yuan’s exchange rate with other major world currencies and helped contain inflation. interior. In contrast, the euro, British pound, Japanese yen and Indian rupee all plunged against the US dollar as the US Federal Reserve kicked off its monetary tightening cycle by sharply raising interest rates to contain inflation from 8.6% in May and from 9.1%. inflation in June.
In the second half of 2022, China may continue to keep its monetary taps proportionately open to provide enough liquidity to support domestic investment and consumption growth. In times of global economic difficulties, this country has repeatedly resorted to heavy investment in improving infrastructure projects and upgrading manufacturing technology to help weather economic downturns, and miraculously, the country has always emerged from downturns in better shape, with increased industrial competitiveness and technological innovations between nations.
For example, thanks to Beijing’s persistent support for green technologies, the country has invested heavily in hydroelectric equipment, solar panels, wind turbines, nuclear reactors, and electric buses and cars. Today, Chinese production in these fields leads the world. In June, China exported 248,000 vehicles, up 30.5 percent from a year earlier, including about a fifth of electric vehicles, making the country a major producer and exporter of new energy vehicles.
Driven by a strong rebound in bank lending and further sales of government bonds, China’s credit jumped much more than expected in June to hit an all-time high. Overall funding, a broad measure of credit, hovered at 5.2 trillion yuan ($777 billion) in June, the People’s Bank of China said last week. It was the highest for any month in June in comparable data dating back to 2017 and topped the consensus estimate of 4.2 trillion yuan. Naturally, the end of the lockdown in Shanghai and other Chinese cities contributed to the increase in borrowing demand.
On the contrary, the other major world economies are currently forced to raise their interest rates by 50 to 75 basis points each to curb runaway inflation. Rising borrowing rates will inevitably stifle personal and business lending and lead to slower economic growth. The economies of the United States, Europe and Japan are generally estimated to contract or even shrink from the end of this year and into 2023.
In the face of “economic triple pressures” including uncertain demand, supply shocks and low expectations, China’s two-pronged development strategy of “internal and external circulation” will come to the fore. The strength of infrastructure investment and exports will again prove the strong resilience of the Chinese economy. Aided by the RCEP free trade agreement and the iconic Belt and Road Initiative, China and its close ASEAN partners could see GDP growth above 4% this year, giving the world a beacon of hope in this time of economic agony and political turmoil.
The author is an editor at the Global Times. [email protected]