China first country to return to growth
Chinese gross domestic product (GDP) growth hit 3.2% in the second quarter of 2020, paving the way for China to become the world’s largest economy.
According to Janus Henderson, Chinese GDP growth in the three months to 30 June, 2020, meant it was the first country to return to growth following the COVID-19 pandemic. However, the weaker first quarter meant it was still 1.6% below where it was a year ago in nominal terms.
If positive growth continued in the second half of 2020 then it would one of the few countries to achieve this.
Mike Kerley, portfolio manager in the Asia-Pacific equities team, said: “This is still an admirable achievement and likely to be markedly better than the US, Europe or the UK which will need a number of years to return to pre-virus levels.
“The challenge is to switch the engines of growth away from investment towards consumption without stoking the fires of asset bubbles, similar to the post Global Financial Crisis years. With unemployment showing an improving trend and manufacturing back on its feet, policies to entice workers to buy and savers to consume will be needed soon.
“It is clear from these quarterly numbers that supply is outstripping demand and to avoid over capacity and excess inventory the products being made need to be bought. The government may need to provide incentives for this to be achieved.”
However, he warned success in China would not be received positively by US President Donald Trump and could lead to heightened tensions ahead of November’s presidential elections.
“This is a headline which will not go down well in Washington and could lead to even more heightened anti-China rhetoric leading into the US elections in November. It’s difficult to see how the majority of Donald Trump’s voter base will find this palatable when, in their eyes, the blame for the malaise that now washes over the US can be placed firmly at Beijing’s door,” he said.
AUTHOR
Laura Dew
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