In June business activity in the service sector of China rose at the fastest rate in the last 10 years. According to experts, the economy of the Asian republics confidence is restored after a sharp decline early in the year because of the pandemic coronavirus. The weakening of quarantine restrictions and financial assistance from the state consumer demand in the country started to increase again, and the business and enterprise went back to work. According to analysts, a significant recovery of China’s economy could slow global recession and accelerate the recovery of the global GDP after the crisis.
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The growth of business activity in the service sector of China rose to a peak in the last 10 years. According to the analytical Agency Caixin in June, the corresponding index PMI climbed to 58.4 points. The figure was the highest since April 2010.
Traditionally, the PMI index reflects the actual state of a particular industry. A reading above 50 points indicates positive economic situation, below 50 points on the stagnation of the sector.
The Chinese services sector is restored for the fourth month in a row after a sharp weakening in late winter. So, in February against the introduction of quarantine measures and massive closures due to pandemic coronavirus, the index of services dropped to the lowest level since November 2005 — 26.5 points.
“In June, service providers remained optimistic about the business prospects for the next 12 months. This is due to the fact that the epidemic was brought under control, the restrictions are removed and the economy recovered rapidly,” the report says Caixin.
The Chinese government has started to specifically stimulate sales growth in the services sector due to government support of the population and, in particular, payments of various benefits. About this RT said an analyst at the Center for civilizational strategies Vitaly Kazakov. According to him, an additional driver of the increase in domestic sales was the sharp decline in exports.
“China has reduced export opportunities because of the pandemic, and a new round of conflict with Washington. USA acted as one of the key partners of China, but now due to the reduction in the number of trade links to Beijing have to look for new markets. This approach requires time, so the resulting export deficit China is now committed to cover the expense of domestic consumption growth”, — explained Volchkov.
In addition to the restoration services, the positive trend experts say in Chinese industry. According to Caixin, in June China’s manufacturing PMI returned to indicators of the beginning of the year and exceeded 51 point. Also in February, the indicator decreased to 40.3 points.
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According to Vitaly Volchkova, a relatively rapid recovery of the Chinese production in recent months was due to the stimulus measures of the government. First and foremost we are talking about paying cash compensation to companies, as well as tax breaks and credits for businesses.
“The Chinese government has a powerful financial instruments, including the possibility of issuing cheap loans to business development that allows the country in a relatively short time to refocus on the domestic market. In these circumstances, up to the end of 2020, the GDP of China will gradually return to pre-crisis level. I believe that by the end of the year the economy will be a plus and will increase by about 2%,” — said Kazakov.
Also one of the signs of recovery of China’s economy has been a marked increase in world copper prices. This point of view in conversation with RT expressed by the expert of the Academy of management Finance and investment Gennady Nikolaev.
“Copper is one of the main indicators of the health of the global economy. For the last three months the metal has risen 31% and almost completely rescued the loss of the early spring due to increased demand from Chinese Industrialists,” — said Nikolaev.
To help others
Note that the background of the worsening pandemic coronavirus in several States in June, the international monetary Fund downgraded the forecast decline in the global economy. According to estimates of the organization, in 2020 the volume of world GDP could shrink by 5.9%. Earlier, the IMF experts expect the decline rate to 3%.
At the same time, a significant recovery of China’s economy could slow global recession and accelerate the recovery of the global GDP after the crisis. About that RT told the leading analyst of the Forex Optimum Ivan kapustyasky.
“The Chinese economy is the second in the world after USA, therefore dynamics of GDP of China plays a huge role in the performance of the world economy. Accordingly, if China will quickly recover from this crisis, it will affect the global GDP,” — said the expert.
As suggested by Vitaly Kazakov, after the global crisis, consumer demand in some countries will begin to steadily recover, but not all States will be able to fully satisfy. The solution should be a complete resume Chinese production by this time, said the expert.
“For example, if the EU and the USA, which suffered from a virus, will quickly recover from the consumer demand, then China with its industrial facilities are easy to cover because Chinese factories are ready to produce a lot of goods of various price categories and for all budgets. Against the background of a pandemic has fallen markedly the value of the assets of a number of global companies. As a result, Chinese investment is unable to support them, as the Republic’s definitely got the money for that”, — said Kazakov.
Moreover, the rapid increase in trade with China after the pandemic will quickly recover from the crisis and the Russian economy, says Ivan kapustyasky.
“For Russia, the restoration of demand from China is important. China to Russia is one of the main trading partners and the volume of mutual trade is growing from year to year. At the same time Russia sells to China more goods than it buys. Accordingly, in case of further growth of the Chinese economy, the demand for Russian products will continue to grow,” concluded kapustyasky.