China Economic Outlook. Third quarter 2020

Summary

Chinese economy is undergoing a V-shape recovery, with Q2 GDP increased significantly from -6.8% y/y in Q1 to 3.2%. Meanwhile, the recovery is still unbalanced as the pickup of the supply side appears much faster than that of the demand side. The recovery tends to make the 2H policy stimulus more conservative.

Key points

• Key points:
• Export growth remains the main drag on growth although it has been better than expected in recent months. However, the sustainability of the medical care equipment export boom remains questionable.
• The better-than-expected Q2 GDP outturn will make the 2H stimulus policy more conservative, leaving more room for further uncertainties.
• In our baseline scenario, we project that the GDP growth will steadily climb up to 5% y/y in Q3 and to around 6% y/y in the last quarter. As a consequence, the full-year growth rate prediction remains at 2.2%, higher than the IMF’s recent projection of 1%.

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