China’s economy should recover in the second half of the year: experts

Chinese industrial firms’ profits fell in the first seven months of this year as the country grapples with pandemic-related disruptions, high temperatures and insufficient domestic demand.

Despite pressure from new COVID-19 outbreaks and a complicated international environment, experts said China’s economy is likely to recover in the second half of the year as new stimulus measures take hold and activity gradually returns to normal.

Calling for further efforts to consolidate the recovery, these experts said they expected strong fiscal stimulus, including vigorous infrastructure spending, as well as targeted monetary easing to support lending to small and medium-sized enterprises (SMEs), the real estate sector and infrastructure financing.

Her comments come as industrial company profits fell 1.1% year-on-year in the first seven months of 2022 after rising 1% in the first six months, according to data released on Saturday by the National Statistics Office (SNB) were published.

Yin Yue, an analyst at Hongta Securities, a Shanghai-listed company, said various industries including coal mining, power and automobile manufacturing saw notable earnings growth in July amid surge in demand for electricity, work resumption and production as well as stimulus measures. However, many other sectors posted slower earnings growth due to high costs and contracting demand, which weighed on overall industry earnings growth.

While downward pressures may continue to weigh on industrial profit growth in the coming months, the country’s new stimulus policies and follow-up measures to stabilize the market should support the economy to stimulate development and consumption, Yin added.

A recent executive meeting of the State Council chaired by Premier Li Keqiang decided that China would take follow-up measures, including an additional quota of “at least 300 billion yuan ($43.7 billion)” in addition to the package of measures to stabilize the economy. . Bank financing instruments and a new quota of more than 500 billion yuan in local government special bonds to be fulfilled before the end of October.

Ye Yindan, a researcher at the Bank of China Research Institute, said the government aims to accelerate demand recovery and promote job stability, adding that such efforts should help attract more than Generate 1 trillion yuan and support the growth of infrastructure investment.

Ye added that China’s economy is likely to stabilize quarter by quarter in the second half of the year with better control of the pandemic, and said more efforts should be made to further boost consumption, speed up the implementation of project infrastructures and the Real stabilize real estate market.

Turning to monetary policy, experts noted that China still has room to cut interest rates further to support the economy, but the scope for such significant easing has narrowed as monetary tightening in the United States continues at a fast pace could become .

Kang Yong, chief economist at KPMG China, said China still has policy space to cut rates after August’s cut as the country’s economic recovery needs to be bolstered, but there is a possibility of further rate cuts People’s Bank of China (PBOC, Central Bank) “shouldn’t be great”.

While the PBC cut interest rates on intermediate-term lending facilities by 10 basis points on Aug. 15, the US Federal Reserve (Fed) was able to hike rates by 75 basis points in September after raising them by the same amount in June and July, experts said .

Fed Chair Jerome Powell on Friday reiterated the Federal Reserve’s “unconditional” commitment to maintaining price stability, even though such measures are likely to cost households and businesses.

Yang Haiping, a researcher at the Institute of Securities and Futures at the Central University of Finance and Economics, said China’s monetary policy can focus on unlocking the potential of existing instruments and unveiling additional structural support as the margin for an interest rate cut has narrowed.

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