Clear Temperature Differences Surrounding the Triple Meeting
"A Key Measure of Policy Will" VS "No Expectations"
As China prepares to announce its second-quarter economic growth rate, opinions both inside and outside the country are divided. While some cite the backlash from global protectionism and the real estate slump as reasons to expect strong downward pressure, there are claims within China that the growth rate will exceed the government's initial target of around 5%.
According to the state-run Global Times (GT) on the 8th, Australia and New Zealand Banking Group (ANZ) recently forecasted that China's second-quarter gross domestic product (GDP) growth rate could fall to 4.9%, based on weakening consumer confidence and domestic demand. China's second-quarter GDP growth rate will be announced on the 15th.
The market is showing a similar reaction. The Hong Kong H-Share Index, composed of mainland companies listed on the Hong Kong Stock Exchange, fell 1.5% that day, dropping more than 9% from its peak on May 20. The CSI300 Index, which tracks large-cap stocks on the Shanghai and Shenzhen stock exchanges, closed lower for five consecutive trading days. Bloomberg attributed this weakness to concerns over the economic recovery.
On the other hand, Chinese institutions and scholars expect the second-quarter economic growth rate to reach as high as 5.4%. Zhou Maohua, a macroeconomic analyst at China Guangda Bank, told GT in an interview that strong export recovery and base effects would accelerate economic growth in the second quarter, resulting in a 5.4% year-on-year increase. Zhou emphasized, "Overall, supply recovered faster than demand in the first half of the year," adding, "In the second half, efforts should be focused on effectively implementing the support measures introduced in the second quarter."
Additionally, Li Chang'an, a professor at the China Institute of Open Economy at the University of International Business and Economics, expects the second-quarter GDP growth rate to be 5.3% due to the implementation of real estate support measures. Yuan Bin, chief economist at China Minsheng Bank, also forecasts a growth rate around 5.2%. Li Anping, chief economist at Guangkai Institute of Industrial Research, offered the most conservative estimate, predicting a 5% growth rate, slightly slower than the 5.3% recorded in the first quarter.
Chinese scholars unanimously agree that attention should be paid to the 20th Central Committee of the Communist Party of China’s Third Plenary Session (3rd Plenum), scheduled for June 15?18. GT explained, "Analysts and economists view the 3rd Plenum as a gauge of how policymakers are striving to deepen reforms comprehensively and strengthen the vitality of the real economy." It added, "Through the 3rd Plenum, funds raised via special government bonds will be executed, and the 'dual circulation' system will be further promoted to support growth in the second half of the year," further noting, "New proposals from the meeting are expected to promote domestic demand expansion and consumption revitalization."
However, external expectations for the 3rd Plenum are at a low point. A representative from a Korean think tank operating in China said, "The likelihood of new policies or slogans exceeding expectations emerging from the 3rd Plenum is very low," explaining, "It will likely emphasize the implementation of existing policies or rebrand previously announced innovations with new slogans."
Shinyao Ying, Asia equity investment director at UK asset management firm Aberdeen, also told Bloomberg, "China’s domestic economy remains weak, and there is little expectation that the 3rd Plenum will introduce stimulus measures," pointing out, "Instead, uncertainty over China-related policies is increasing ahead of European elections." Morgan Stanley strategists, including Laura Wang, assessed that "China still faces obstacles such as currency weakness, geopolitical uncertainties, and macroeconomic challenges."
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