GDP GROWTH UP… Chinese economy gains some points after season of Covid woes

NEWS CHINA ECONOMY

HONG KONG: China’s economy  grew by 3.2 per cent, in GDP terms, in the second quarter of 2020, indicating a recovery from the damage caused by the coronavirus pandemic, following the historic 6.8 per cent decline in the first quarter, the South China Morning Post has reported this week. GDP is the value of all goods and services produced within a country during a specific period of time.

“This, despite China’s trade was with the US, and the important export engine struggled under American tariffs. China’s quarterly growth rate averaged 9.4 per cent from 1989 until 2019, reaching an all-time high of 15.4 per cent in the first quarter of 1993. But under pressure from the trade war and long-standing structural issues, China’s growth rate slowed to 6.1 per cent in 2019,  which was the slowest since 1990,” the report said.

China is the world’s second largest economy, next only to that of the US. The report is based on official data released by China, which need not necessarily be accurate.

China’s consumer price index (CPI)  rose by 2.5 per cent in June from a year earlier, slightly up from a 2.4 per cent gain in May. 

China’s CPI measures changes in the prices paid by consumers for a basket of goods and services. It is an important way to measure changes in purchasing trends and to track inflation. China has never disclosed the weighting of its CPI “basket”, but estimates suggest food, tobacco and alcohol make up about 30 per cent, with pork believed to be the most heavily weighted product.

China’s producer price index (PPI)  rose to minus 3.0 per cent in June, from minus 3.7 per cent in May.  PPI measures the changes in the prices manufacturers charge wholesalers for their goods, so-called factory gate prices. It is an early indicator of changes in consumer prices, as it offers foresight about how much goods will cost before they hit the shelves.

While China’s consumer price index (CPI) measures changes from the consumers’ perspective, PPI takes the seller’s viewpoint. China’s PPI dropped into negative territory in the second half of 2019, meaning manufacturers were increasingly having to discount their products due to the slowdown in the economy. This continued at the start of 2020 due to the coronavirus outbreak.

China’s official manufacturing purchasing managers’ index (PMI)  stood at 50.9 in June, with a reading above 50 signifying growth in activity in this survey of factory operators. This followed a reading of 50.6 in May, highlighting the challenges China faces while the recovery from the coronavirus lockdown continued. 

The official PMI largely measures the sentiment among larger firms, many which are state owned. It is compiled from surveys of business owners, purchasing managers and supply chain managers, gauging changes in things like production, new orders, employment and delivery times.

China’s imports in June  rose by 2.7 per cent from a year earlier, an improvement from a minus 16.7 per cent slump in May. Imports have become an increasingly closely-watched gauge of China’s economic health, as it transitioned away from the export-driven growth model towards a more consumption-based model. China’s trade economy roared back to growth in June, with exports and imports both recovering from the coronavirus lockdown, data released on Tuesday showed.

Exports from the world’s second largest economy rose by 0.5 per cent from a year earlier in June, a sharp improvement on  May’s minus 3.3 per cent slump. 

Chinese imports rose by 2.7 per cent from June 2019’s levels, much improved on May’s minus 16.7 per cent and the first monthly import growth since December 2019.

China’s export-driven economy was for decades the workshop of the world. In 2001, when China joined the World Trade Organisation (WTO), it accounted for 4 per cent of the world’s exports, and by 2017, that had risen to 13 per cent.

The trade war with the United States, though, damaged China’s exports as tariffs made its goods more expensive for American buyers. The coronavirus outbreak subsequently damaged overseas demand for Chinese products, leading many analysts to expect a huge slump in exports over the second quarter of the year. –SOUTH CHINA MORNING POST

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