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ECONOMY: No Economic Growth Target for 2020
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No Economic Growth Target for 2020
By Morgan Brady

BT 202007 ECONOMY 01The government has decided not to set an economic growth target for 2020. Cases of the coronavirus are resurging in Beijing and the world economic and trade environment is not supportive of growth. Many factors are standing as an obstacle in the face of growth.

The Chinese economy shrank by 6.8% in the first four months of the year, which is the first contraction on record. In the second quarter the gross domestic product (GDP) growth may return to 2% or 3% as factories step up production.

China was struggling with a slowing economy before the virus hit hard, and it is currently trying to spend its way out of the slump. The country will pump 3.6 trillion yuan ($500 billion) into its economy this year, to be spent on infrastructure projects and tax cuts. The purpose is to create around 9 million jobs and mitigate the fallout from the pandemic. This will likely drive a strong recovery in imports.

Some analysts are predicting that the central bank will be cutting both the interest rates and the required reserve ratio (RRR). This will lower the amount of cash that banks are required to hold in reserves, and will also make borrowing more affordable.


The Chinese economy is starting to recover

A man wearing a protective face mask walks in a nearly empty shopping mall in beijingA man wearing a protective face mask walks in a nearly empty shopping mall in beijing

The Chinese economy did show some recovery when stores and factories reopened after witnessing a nose-dive when most businesses closed during lockdown. Despite this, many consumers are still concerned about getting infected and they have not spent money on products. The economy seems to be dipping a second time before embarking on a more sustainable recovery.

China has turned its factories back on after bringing the coronavirus outbreak largely under control within its borders, but weak sales at stores raise fears about a possible second downturn. Imports in May declined 16.7% from a year earlier. It was the deepest contraction since January 2016, suggesting domestic demand remains sluggish.

Shipments of smartphones to stores in China went up 17% from a year ago, and the country’s industrial production increased very fast in May, as it was 3.9% higher than last year. Those developments make economists more optimistic.



Factories output rises less than expected in China

An employee works on a production line manufacturing steel structures at a factory in HuzhouAn employee works on a production line manufacturing steel structures at a factory in Huzhou

The Chinese economy shrank in the first three months of this year, while inventories of unsold goods are piling up. As the virus spreads, factories are producing clothes and electronics faster than consumers in China or overseas want to buy them. China’s industrial output growth quickened to 4.4% in May from a year earlier. It was the highest percentage increase since December, but the gain was smaller than expected.

BT 202007 ECONOMY 03Sales have fallen for four straight months as shops, restaurants and other crowded places closed during the coronavirus pandemic. A collapse in export orders amid global lockdowns has left factories more reliant on domestic demand, which is recovering at a more sluggish pace. Overseas orders dwindled, and the retail sales fell more sharply than expected.

Consumer prices and the export of goods

The producer price index PPI the price charged to buyers from producers at the factory gates is teetering on the brink of deflationThe producer price index (PPI), the price charged to buyers from producers at the factory gates, is teetering on the brink of deflation

In May, the consumer price went up by 2.4% year on year, and down by 0.8% month on month. The prices for tobacco and food went up by 8.5% year on year, those of clothing went down by 0.4%, articles and services for daily use increased by 0.1%, health care went up by 2.1%. The investment in fixed assets was 19,919.4 billion yuan. It decreased by 6.3% from a year earlier.

The total value of exports and imports of goods in the first five months of the year was 2,469.6 billion yuan. This was a decrease of 4.9% year on year. The total value of exports was 1,456.2 billion yuan in May, which is a 1.4% increase, and the total value of imports was 1,013.4 billion as it went down by 12.7%.

There was a study increase in investment in education and the healthcare sector. There was also growth in production of information transmission, real estate, and financial intermediation services. The wholesale, accommodation, and retail trades suffered a decline from a year earlier. The total value added of the industrial enterprises above the designated size grew in May, indicating that the production machine is still working.




There are still many challenges standing in the way of recovery, but China is doing all it can to climb out of that economic decline. In the remainder of 2020, the Chinese economy would need to show strong recovery, and the recent signs are positive.

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