China’s economy will swiftly return to its potential growth rate and there will be significant improvement in the next three months, People’s Bank of China (PBOC) Deputy Governor Chen Yulu (陳雨露) said yesterday.
“Economic indicators will likely show significant improvement in the second quarter and the Chinese economy will return to potential output level rather swiftly,” Chen told reporters in Beijing.
Chen repeated earlier pledges to keep credit growth stable and make good use of the central bank’s targeted easing approach, and did not announce any new stimulus measures.
China was hit hard last month by COVID-19 and the measures taken to stop its spread, with a historic slump seen across all economic indicators as quarantines and shutdowns stopped the movement of goods and people.
Although activity has restarted it is still not back at normal levels, with many services business struggling and the outlook for exporters grim as the world deals with the pandemic.
“Based on payments, deposits and loan data since March, China’s real economy is improving somewhat due to earlier targeted monetary policies,” Chen said.
The bank would continue to direct funding to private and small firms as well as those critical to the supply chain, he said.
China’s surveyed unemployment rate jumped to 6.2 percent this month, indicating headwinds for local consumption ahead.
The stock market has been more resilient than other global markets, with risks low and the effects of the virus being absorbed, China Securities Regulatory Commission vice chairman Li Chao (李超) said at the same briefing.
The Chinese currency would remain at about 7 yuan per US dollar with movement on either side of that level, Chen said.
While the virus’ effect on supplies and inflation were likely to continue for a while, price hikes will start to moderate as the economy resumes, and inflation growth would slow from the second quarter and continue that way in the rest of the year, Chen said.
However, China will see the slowest growth this year in more than 40 years, according to economists, who have drastically slashed their forecasts after an across-the-board slump in activity in the first two months of the year.
The economy would grow 3 percent this year, according to the median of 14 forecasts since Monday last week. That is the lowest since a contraction in 1976 — the final year of the Cultural Revolution, which wrecked the economy and society, and the year Mao Zedong (毛澤東) died.
The median of economists’ forecasts is for the economy to shrink 6 percent in the first quarter from the same period a year earlier. There has never been such a contraction since comparable data began in 1990.
A possible recovery later this year would largely depend on the pace of work resumption and policymakers’ efforts to stimulate the economy, economists say.
That process might be hindered by the spread of COVID-19 worldwide, as global supply chains will likely be disrupted and external demand might shrink.
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