China’s economy showed a 3.2% growth in gross domestic product (GDP) in the second quarter of 2020, becoming the first major economy to record a return to growth since the start of the Covid-19 pandemic.
The recovery in the second quarter comes after the Chinese economy had previously shrunk by 6.8% in the first three months of the year, due to having effectively shut down all economic activities to contain the spread of the Covid-19 virus. By displaying a positive growth in Q2 2020, China has successfully managed to avoid slipping into a recession for the first half of this year. (A recession is usually defined as two consecutive quarters of negative GDP growth.)
The recorded 6.8% growth rate has also surpassed the median forecast of analysts polled by Bloomberg that predicted a GDP growth of 2.4% for China’s second quarter. However, China’s economy still remains 1.6% smaller than it was at the same time a year ago. With consumer spending still weaker than expected, the rebound has been largely industry-driven; it also remains vulnerable to setbacks in foreign demands as lockdowns remain set in place in numerous countries overseas.
“The recovery in the second quarter is strong, but also highly uneven,” said Larry Hu, chief China economist at Macquarie Bank. Hu pointed out that supply recovery was stronger than demand, in addition to investment being a lot stronger than consumption. “Looking ahead, while the growth momentum would slow inevitably, GDP growth could rebound to around 5 per cent on year in the second half [of 2020].”
Meanwhile, a researcher with the Ministry of Commerce, Mei Xinyu, has said that given the downturn in the American economy, China’s economic output has “definitely” exceeded that of the largest economy in the world in the second quarter. “China’s whole-year GDP in 2020 could be slightly lower than that of the US,” said Mei. “But if the domestic chaos in the United States escalates, China’s whole-year GDP could exceed that of US this year.”
Indeed, China’s positive growth easily outstrips the performance of other economies in the world. Besides the United States, nations in the European Union and Asian countries such as Japan are also struggling to reopen their economies. Based on Singapore’s Q2 figures, the island nation has officially slid into a recession with a large decline of 41.2% in GDP posted in Q2; here on the home front, official statistics for Q2 have yet to be released but the Department of Statistics Malaysia (DOSM) has predicted that Malaysia will slip into an economic recession this year.