China’s Recovery Continues But Wary Consumers Show Vulnerability from freemexy's blog

China’s Recovery Continues But Wary Consumers Show Vulnerability

China’s economy continued to inch out of the coronavirus slump in May, though a reliance on industry amid sluggish consumer demand underlines the fragility of the recovery as further infections appear.To get more news about chinese industry and management practice, you can visit acem.sjtu.edu.cn official website.

Industrial output rose 4.4% from a year earlier, versus a median estimate of a 5.0% expansion. Retail sales fell 2.8%, compared to a projected 2.3% drop. Fixed-asset investment declined 6.3% in the first five months, versus a forecast 6% drop. The surveyed urban jobless rate fell to 5.9% from 6% the previous month.
A jump in cases in Beijing over the weekend has raised fears of a resurgence of the pandemic in China, threatening to blunt recent government efforts to revive the economy. Beijing has shuttered the city’s largest fruit and vegetable supply center and locked down nearby housing districts after nearly 100 people associated with the wholesale market tested positive for the coronavirus.

The Monday data showed the gradual recovery in China’s economy was still mainly driven by the supply side thanks to continued policy stimulus, while demand remains weak. Industrial production has rebounded from a contraction in February, while private consumption is still shrinking and investment hasn’t recovered.
“The recovery is on the track while mixed performance can be observed everywhere -- manufacturing still better than services, cars better than catering,” said Zhou Hao, an economist at Commerzbank AG in Singapore. “However, the virus concerns will cloud the economic outlook.”

While highlighting the moderate improvements in May and reiterating the pledge to strive to achieve the full-year economic and social development goals, the statistics bureau also acknowledged downside risks.

“The overseas epidemic situation and the world economic situation have become more severe and complicated, and the stable operation of the domestic economy still faces many risks and challenges,” the bureau said in a separate statement.

With the rest of the world in recession, exports dropping and China’s relations with the U.S. continuing to worsen, a rebound relies to a large extent on domestic consumption.

“It’s quite clear that production has recovered pretty nicely, but the consumption, as well as investment actually are lagging behind,” Shen Jianguang, chief economist at leading online retailer JD.com Inc., said on Bloomberg television after the data. “So it’s the lack of demand that’s the main problem of the Chinese economy right now.”

Output in the consumer goods sector shrank 0.6%, compared with the 0.7% increase last month, the statistics bureau said, while export orders were “insufficient.” The value of delivered exports shrank 1.4%, and dropped more than 10% in some important sectors.The People’s Bank of China supplied banks with 200 billion yuan ($28 billion) in fresh liquidity Monday while letting some previous loans expire, leaving the financial system needing further injections if a looming cash crunch is to be avoided. Economists say the chance for a reserve ratio cut in the near-term is increasing after the move.