Mu Hyup "China's Economy Recovers in Q2... Growth Rate Expected in 5% Range This Year"

"COVID-19 Cases Expected to Peak During Chunjol
Consumption and Infrastructure Investment Anticipated to Expand"

Guangzhou Haizhu District, Guangdong Province, China. [Image source=AP Yonhap News]

[Asia Economy Reporter Moon Chaeseok] Although COVID-19 cases are expected to surge after China's largest holiday, the Spring Festival (February 22-28), the economy is projected to recover from the second quarter onward.

On the 11th, the Korea International Trade Association (KITA) released a report titled "China's With-COVID Outlook and Implications" containing these insights.

KITA explained that as the Chinese government eases lockdowns and implements a with-COVID policy, COVID-19 cases are rapidly increasing mainly in major cities. It is expected that after peaking following the Spring Festival, the situation will stabilize in the second quarter. This expectation is based on the fact that Vietnam and India also showed stabilization within 2 to 3 months after their COVID-19 cases peaked following with-COVID policies.

This year, China's economy is anticipated to follow a "weak start, strong finish" (slow first half, recovery in the second half) pattern, achieving a growth rate of around 5%. Global investment banks (IBs) such as Goldman Sachs and Morgan Stanley have raised their growth forecasts to above 5% after China's with-COVID declaration. Once the COVID-19 spread subsides after the second quarter, the economy is expected to recover in the order of consumption → production and service sector → manufacturing sector. As workplaces resume operations, production is expected to increase, especially in raw materials and intermediate goods, which underwent inventory adjustments last year.

Another positive factor is the Chinese government's adjustment of the pace of the "common prosperity" distribution policy. Based on the domestic demand expansion strategy announced last month for 2022-2035, the government plans to actively promote government-led investment and consumption revitalization. It intends to support consumption in services such as housing environment improvement, expansion of eco-friendly vehicle consumption, and elderly care services. The strategy also includes the development of private enterprises and platform companies, suggesting a relaxation of corporate regulations.

China is strongly promoting not only short-term stimulus measures but also long-term new infrastructure construction (new SOC). Investments in digital-based infrastructure such as 5G (5th generation) mobile communications, artificial intelligence (AI), and big data are increasing. These investments are analyzed to have a positive impact on China's qualitative growth, domestic demand stimulation, and supply reform. China is in a position where it must respond to the technological hegemony competition with the United States and accelerate the industrial structure advancement due to digital transformation (DX).

Lee Bong-geol, head of KITA's China team, emphasized, "In the midst of a global economic recession and external uncertainties, the recovery of China's economy will act as a factor for the recovery of our economic growth," adding, "Companies should proactively prepare for changes in economic policies such as China's consumption recovery and new infrastructure investment."

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