Economists and analysts say China is likely to show positive economic growth in the second quarter of this year, and growth is expected to pick up in June as work and production gradually resume. They say policymakers should introduce more easing measures, such as lockdowns. B. more infrastructure support, more additional tax relief and lower real bank lending rates to cushion the impact of COVID-19 and stabilize global growth in the coming months.
Her comments come as May producer prices in China rose at the slowest pace since March 2021 and as the government coordinated measures to combat COVID-19 with economic developments and stabilized industrial and supply chains in key sectors, leaving room for further stimulus support the economy.
Zhong Zhengsheng, chief economist at Ping An Securities, pointed out that China’s economy is gradually returning to normal and the country is likely to see positive growth in the second quarter as the impact of the pandemic gradually eases, and that the government will take further measures to support growth stabilize. “The worst moment may have passed for China’s economy and the country’s economic recovery is expected to gain momentum in June,” he said.
Meanwhile, the National Bureau of Statistics said on June 10 that the Producer Price Index (PPI), which measures factory prices in China, rose 6.4% year-on-year in May, after rising 8% the previous month during The consumer price index (CPI), the main indicator of inflation in China, rose 2.1% yoy in May, unchanged from April.
Pour Lu Ting, chief China economist at Nomura, said May PPI and CPI inflation were broadly in line with market expectations, and his team expects the first index’s inflation to fall and the second’s to rise slightly.
“Due to weak demand, supply disruptions in China since early March following the resurgence of COVID-19 have not prompted a rapid rise in domestic inflation,” he said. “For this reason, Beijing is not overly concerned about inflation as it introduces demand stimulus measures, but the scope of policy rate cuts remains limited by China’s gradual rise in CPI inflation and US Federal Reserve rate hikes.”
In fact, price levels in China are within a manageable range compared to rising prices in other major economies. According to data from the US Department of Labor released on June 10, US inflation hit a new 40-year high in May, with CPI there rising 8.6% yoy.
Meanwhile, Wen Bin, chief researcher at China Minsheng Bank, noted that China’s overall level of inflation is generally manageable, suggesting the country has room to step up support for macro policies. However, Wen warned of the downward pressure China’s economy is facing, saying the government should vigorously implement macroeconomic policies to stabilize growth and keep economic growth within reasonable bounds in the second quarter. In addition, additional efforts should be made to boost the supply of credit to the real economy, to ensure supply and price stability and to avoid the risks of imported inflation.
The State Council – the Chinese government – recently unveiled a total of 33 measures covering tax, financial, investment, consumption and industrial policies to further stabilize the economy.
Credit expansion in China improved in May as the impact of the pandemic began to ease. The increase in total social financing, that is, the total amount of real economy financing, was 2.79 trillion yuan in May, up 839.9 billion yuan from the same period last year ended March 10 June was announced People’s Bank of China, the country’s central bank.
At the same time, monetary conditions were eased, with China’s broad money supply, or M2, at 252.7 trillion yuan at the end of May, up 11.1% year on year, the central bank said, indicating that the Growth rate was 0.6 points higher than a month earlier.
Looking ahead, Robin Xing, Morgan Stanley’s chief China economist, said policymakers could introduce more pandemic tax breaks or move some construction bond quotas from 2023 to this year.
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