China: A More “Normal” Growth

Published on July 13, 2020

The National Bureau of Statistics of China (NBS) will release major economic data for H1, Q1 and June 2020 this Thursday, July 16, followed by a press conference at 10:00 a.m., local Beijing time.

And in the run-up to the data release, as is the tradition, on Wednesday, July 8, nine economic departments submitted their respective economic analysis reports to the Central Financial and Economic Affairs Commission (CFEAC) and State Council.

** The Q2 GDP estimates appear to have ranged between 2.2% and 3.1%, all at or above what seems to be median market expectations of around 2.2%. Of the nine departments, two are believed to have penciled in a Q2 GDP growth rate at 3.1%, the top end of the range, four came in between 2.7%-3.0%, while two estimated GDP at between 2.2%-2.3%. Note that all departments are not created equal, and these submissions should only be seen for a general sense of directionality and color, and not as a forecast for the actual NBS data release.

** The pace of factory activity is also seen to have picked up in June, and value-added industrial output should extend its rebounding trend from 3.9% in April, 4.4% in May, to a potentially 4.7% growth rate in June, around market estimates.

** The volatile but more widely watched monthly retail sales data is very likely to reverse into positive territory, from drops of 7.5% in April and 2.8% in May, and it is estimated that could come in as high as 3.2% year on year for June.

Whatever the exact figure, in the big picture, after four consecutive months of negative growth, consumption clearly turned positive in June. Led by fixed asset investment, industrial output, and retail sales, China’s preeminent economic planning department, the National Development and Reform Commission (NDRC), now believes GDP growth for the second half of the year could hit 6.0% or slightly above, after an estimated 1.9% contraction for H1 2020.

Overall, Chinese economic officials will point to the more positive data as evidence of government stimulus measures that include increased federal deficit spending and bond issuance taking hold, and will be encouraged by further signs of a transition of the economy in June towards more “normal” growth rate that, it is hoped, should carry into H2 of 2020.

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