The Bank of Korea Expects Recovery in China's Economy in the Second Half of the Year... US-China Conflict as a Limiting Factor

[Asia Economy Reporter Kim Eun-byeol] The Bank of Korea expects China to continue its economic recovery in the second half of the year. It cited the conflict between the United States and China as a factor that could constrain the economic recovery.

In the 'Overseas Economic Focus' report released on the 26th, the Bank of Korea made this forecast for China's economy.

According to China's National Bureau of Statistics, China's gross domestic product (GDP) in the second quarter increased by 3.2% compared to the same period last year, turning positive. This result significantly exceeded Bloomberg's forecast of -2.4%. While industrial production continued to grow (4.4%), the decline in fixed investment (-3.1%, cumulative) and retail sales (-4.0%) slowed.

Exports in the second quarter turned positive (+0.1%) despite the global spread of the novel coronavirus (COVID-19), showing significant improvement compared to the previous quarter (-13.3%). The manufacturing Purchasing Managers' Index (PMI) has also been above the baseline of 50 since March, indicating improved business sentiment. In May, operating profits of manufacturing companies with annual sales exceeding 20 million yuan increased by 6.0% year-on-year, marking the first increase since the outbreak of COVID-19.

Based on this, the Bank of Korea assessed that "China's economy will continue its recovery in the second half of the year, supported by production normalization, strong government stimulus measures, and recovery in consumer sentiment." However, it added, "Concerns over a resurgence of COVID-19, intensified US-China conflicts following the passage of the Hong Kong security law, and the US presidential election are domestic and international uncertainties that could act as constraints."

Regarding the US economy, it stated, "Some real indicators are gradually improving due to the gradual reopening of economic activities and active fiscal and monetary policies," but judged that "since the end of June, COVID-19 has resurged mainly in the western and southern regions, showing signs of a slight slowdown in economic recovery."

It also added, "If additional fiscal support is delayed, there is concern that it could negatively affect future economic recovery."

According to the Bank of Korea, the additional $600 unemployment benefit payment ends at the end of this month, the Paycheck Protection Program application deadline is August 8, and the suspension of principal and interest repayments on student loans ends on September 30.

This content was produced with the assistance of AI translation services.