Monday, 20 July 2015

Chinese economy to pick up in 2nd half of 2015: US analysts

In World Economy News 21/07/2015

Wall Street analysts have predicted a pick-up of China’s economy in the second half of this year after its gross domestic product (GDP) data for the second quarter was published well above market expectations.
China’s second-quarter GDP expanded 7 percent year-on-year, remaining unchanged from the first quarter. It grew 1.7 percent over the previous quarter, the National Bureau of Statistics announced on Wednesday.
The growth rate beat the median market forecast of 6.9 percent for the second quarter.
“The economic data points released are positive indications that China’s economy is coming through a bottoming process,” said Brendan Ahern, chief investment officer of the U.S. fund company KraneShares.
“Second quarter GDP generally surprised on the upside. The largest driver appears to be the services,” said Qu Hongbin, chief China economist with the Hongkong and Shanghai Banking Corporation (HSBC) in a report.
“The acceleration was broad based: primary, secondary and tertiary industry GDP all rebounded sequentially,” said Song Yu, an economist with Goldman Sachs.
The growth rates of 7.5, 7 or 6.5 percent are still the envy of other economies. The most impressive is the 10.6-percent growth rate in retail sales, which shows the long-run policy benefit of urbanization and raising domestic consumption, Ahern said.
He expected that China’s re-balancing would take years with peaks and valleys as the destination is most important. Recent interest rate cuts have steepened the Chinese yield curve, which is a sign the economy has likely bottomed out with stronger prospects going forward.
Other analysts also believed that China’s economic recovery will continue with the help of government policies.
The underlying economy appears to be growing at a more modest pace, and it remains both at an early stage and rather fragile. In order to strengthen and sustain the recovery, more policy easing measures are likely still needed and likely in the second half of 2015, Qu said.
“China has a wide range of policies that will beneficially affect the economy in quarters to come: One Belt One Road, Internet Plus, and Made In China, to name a few,” Ahern said. “Continued focus on the implementation of these policies will help mitigate Greece’s turmoil in Europe and the continued low growth environment in the United States.”
Song said that “as a result, we do expect activity growth to accelerate further in the third quarter, which will keep the economy on the track of hitting the around-7.0-percent growth target.”
Tung Chee-hwa, vice chairman of China’s top political advisory body, said on July 20 in Singapore that as Chinese economy enters the mode of “new normal”, the interpretation of traditional statistics should also get improved.
Tung, who is also a former chief executive of China’s Hong Kong Special Administrative Region (HKSAR), made the remarks in his keynote speech at the opening ceremony of the Future China Global Forum here.
Pointing out that managing a soft landing and achieving a new normal is never easy to such a huge economy, he stressed that it is “particularly difficult” as the global economy is still suffering from the after-effects of the economic crisis of 2008 and 2009.
As the “new normal” takes hold, traditional calculation of statistics does not work anymore, one example is the employment rate, he said.
“There has been concerns over whether employment would be affected as the economy entered the new normal,” Tung said, however, he stressed, with GDP growing at 7 percent, “every dollar the GDP produced by the service sector, one third more jobs would be created as compared to jobs created by manufacturing sector.”
“This is the say, even though as the whole economic growth is to drop from 10 percent to 7 percent, the employment should stay,” he said.
He further explained his point with the latest economic data. According to the statistics released last Wednesday, 7 million new jobs have been created in the first half of 2015, which Tung said “indeed help to prove the contention to be correct.”
“The new normal is well underway to create 10 million jobs as planned annually, or indeed even more,” he said, adding that under the new normal, many economic pattern has to be interpreted carefully to draw conclusion.
In his speech, Tung also highlighted that as China enters the state of new normal, problems also emerged, including the disparity between industries and enterprises.
“Those regions eager to restructure and upgrade their economies will maintain a stable growth while those slow in action will suffer badly,” he said, adding that new industries such as IT, high-end equipment manufacturing, new energy and e-commerce would go faster, becoming the new engine of economy.
Despite the difficulties, Tung remains optimistic about the future of China’s economy.
Since 1949, from a impoverished, war-time country to the second largest economy in the world, it has not been an easy ride for China, he said, adding that a large economy integrating into a greater world is also much more complex.
“Combine that, managing a soft landing and achieving a new normal is almost an impossible task. But the Chinese economy has proven elasticity and potential that gave her a lot of leeway,” he said.

Source: People’s Republic of China