Sharp Rebound in China's Q2 Growth Rate
Manufacturing PMI Surpasses 50 After Bottoming in February
Entering Economic Expansion
June Exports Up 0.5% Year-on-Year
[Asia Economy Beijing=Special Correspondent Jo Young-shin] As the Chinese economy has succeeded in a V-shaped rebound, there is an assessment that it has escaped the shock of the novel coronavirus infection (COVID-19). As the epidemic subsided, domestic demand based on a population of 1.4 billion led the economic recovery.
The rapid recovery of the economy was already predicted by various indicators. This is because major economic indicators suggesting a positive sign were announced last month. As of the end of June, China's Manufacturing Purchasing Managers' Index (PMI) was 50.9, up 0.3 points from 50.6 in the previous month. A PMI above 50 indicates economic expansion, while below 50 indicates contraction. Since recording an all-time low of 35.7 in February, China's manufacturing PMI showed expansionary figures above 50 for four consecutive months: 52.6 in March, 50.8 in April, and 50.6 in May.
The economic recovery led to exports. China's export value in June was $213.57 billion, an increase of 0.5% compared to the same month last year. This means manufacturing and production translated into exports. Imports amounted to $167.15 billion, increasing by 2.7% compared to the same period last year.
The non-manufacturing PMI, including the service sector, was recorded at 54.4, up 0.8 points from the previous month. Transportation, warehousing and postal services, information transmission software, IT services, and finance sectors are recovering rapidly.
In the first quarter, China's economic growth rate was -6.8%. COVID-19, which first broke out in Wuhan, China, plunged the entire country into fear. Wuhan city, with a population of 10 million, was completely locked down, and many cities were shut down temporarily. Production and consumption activities were also halted. During February and March, when COVID-19 was rampant, the world's factory, China, stopped.
Although the economy has rebounded, it is still too early to be optimistic about the Chinese economy. COVID-19 has not been completely eradicated. The possibility of spread remains at any time. If a second wave begins this fall and winter, the Chinese economy could plunge again. There is also a view that economic growth in China may be limited as major economies such as the United States and Europe are still struggling with COVID-19.
The increasingly serious US-China conflict is also a variable. When US President Donald Trump signed an executive order on the 14th (local time) to revoke Hong Kong's special status, China summoned the US ambassador to China, expressed strong dissatisfaction, and announced corresponding retaliation. Starting from the US-China trade dispute, conflicts have occurred over the Hong Kong National Security Law, Taiwan independence issues, COVID-19 responsibility, human rights in Xinjiang Uyghur, and South China Sea territorial claims. The general interpretation is that bilateral relations have deteriorated.
The problem is that the political relationship between the two countries can directly affect the economy. Under the current situation, it is unlikely that the second phase of US-China trade negotiations will proceed smoothly. In January, the US and China reached a phase one trade agreement, which included China purchasing large amounts of US products including agricultural products, and the US withdrawing additional tariffs on Chinese products and lowering tariff rates on some products.
The second phase trade negotiations are much more complex than phase one, involving issues such as subsidies to Chinese state-owned enterprises and correction of unfair trade practices. Even if relations between the two countries were smooth, these are difficult challenges to resolve. The possibility of the phase one agreement being broken cannot be ruled out, let alone the second phase negotiations.
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