China’s coronavirus recovery plan falls back on old playbook of debt and construction
- China’s industrial recovery in May was sparked by local government spending and an imminent construction boom, analysts said
- Coronavirus recovery remains disjointed, with retail and investment still negative, even as analysts revised up annual economic growth forecasts
Analysts revised up China’s economic growth outlook for 2020, after new data suggested the government was turning to its old playbook to try and steer the economy out of the coronavirus crisis.
Consumption remained weak, with retail sales and asset investment both contracting again, according to new data released by the National Bureau of Statistics (NBS) on Monday. But in the industrial economy and specific areas of investment, there were suggestions of a construction boom.
Industrial production, a metric of output in the manufacturing, mining and utilities sectors, grew by 4.4 per cent in May compared to a year earlier, the strongest pace since December 2019. The growth was slightly lower than expected, but was driven by an uptick in the production of construction machinery.
The recovery was mainly driven by a further rise in infrastructure investment growth, which jumped to 10.9 per cent year on year in May from 4.8 per cent in April
Fixed asset investment growth remained negative at minus 6.3 per cent in May from a year earlier, but within that there were signs that traditional investment channels were picking up.
“The recovery was mainly driven by a further rise in infrastructure investment growth, which jumped to 10.9 per cent year on year in May from 4.8 per cent in April,” wrote Lu Ting, Nomura’s chief China analyst in a note.