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Macroscope | China’s economy is just taking a breather, not stalling
- Growth has slowed to 4.9 per cent and housing market confidence has been hit hard by the Evergrande crisis, but the economy will speed up again as the global recovery gathers pace
- Beijing’s growth target is within reach, but the economy will rely on export drivers for now at least
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There’s a general feeling that China’s economy is slowing, but it’s nothing to get too worried about. China’s recovery is just taking a breather from the breakneck pace of economic expansion seen at the start of the year as the mainland bounced back from the Covid-19 crisis.
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Growth has slowed to 4.9 per cent and housing market confidence has been hit hard by the Evergrande crisis, but the economy will speed up again as the global recovery gathers momentum.
Beijing’s 2021 target of above 6 per cent growth is easily within reach, but the economy will be relying on its traditional external drivers, with export-led recovery taking the lead until domestic demand can take up the slack.
Consumer and business confidence may look muted, but there is no need for a major policy push. Monetary and fiscal policy settings are probably about right and future growth trends should settle into a 5-to-6-per-cent track over the next few years.
Restoring stability is key for China after the shock of the pandemic and it is going to take some time before the economy settles back into a more normal growth pattern. Economic growth of 18.3 per cent year on year in the first quarter of this year was clearly unsustainable in terms of output capacity and price constraints.
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China’s economy expands record 18.3 per cent in the first quarter of 2021
China’s economy expands record 18.3 per cent in the first quarter of 2021
The subsequent slowdown to a more moderate rate, averaging 6.4 per cent over the past two quarters, must be a relief for policymakers as it comes closer to Beijing’s target for the year.
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