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The Chinese economy has continued the V-shape recovery due to its "first-in, first-out" of the Covid-19 pandemic, with Q3 GDP picked up significantly to 4.9% y/y from 3.2% y/y in Q2. Meanwhile, the uneven feature of recovery that the demand side lags behind the supply side is significantly mitigating.
September 16, 2020
China | August economic recovery maintained the momentum with the uneven feature mitigated
Economic activity indicators of August including industrial production,fixed-asset investment and retail sales all showed remarkable improvement from their previous month's readings and beat the consensus. Although the recovery was still unbalanced, the silver lining is retail sales entered positive expansion.
China’s August credit data bounced back from the previous readings driven by the robust new RMB loans, government bonds and net corporate bond financing. However, the authorities' attention to normalize easing monetary measures is still in place.
Coronavirus-related product shipments continued to support China's August export growth, which helped to maintain the growth momentum. On the other hand, import growth remained in the negative territory, mostly due to the price effect.
The latest August manufacturing Purchasing Managers' Index (PMI) came at 51, slightly edging down from 51.1 in July, but remained in the expansionary territory. Caixin China PMI also improved significantly in August, indicating continuing recovery of manufacturing activities.
Economic activity indicators of July including industrial production, fixed asset investment and retail sales all pointed that growth recovery extended in the second half of the year. However, the demand side still lagged behind the supply side.
The significantly better-than-expected export growth boosted by coronavirus-related product shipments, together with a volume expansion while total value dipping import growth helped to maintain the growth momentum extending in 2H 2020.
The July Politburo meeting emphasized the importance of the domestic market for Chinese economy amid COVID-19 pandemic. In addition, the meeting also confirmed that the stimulus policy will be gradually normalized with ongoing rollout of targeted fiscal stimulus and more conservative monetary policy stance.