The Chinese economy reverted to growth of 3.2 percent YoY in 2Q20, versus the 6.8 percent YoY contraction reported for 1Q20, thanks to the government's effective measures in combating the coronavirus (COVID-19) pandemic, thus allowing economic activity in the country to return to normalcy. Its industrial production resumed a 4.8 percent YoY growth in June, against the 8.4 percent (YTD, YoY) contraction recoded for 1Q20. Exports grew slightly by 0.14 percent YoY in 2Q20 after shrinking 13.4 percent YoY in 1Q20, attributable to short-term factors resulting from soaring shipments of pharmaceutical products, medical supplies and equipment, such as medical masks, amid the COVID-19 pandemic in many countries.
Looking into 2H20, China's easing guidelines to allow travel agents to sell domestic tour packages again will likely help reinvigorate domestic consumption and in turn create over 28 million jobs in the tourism industry, such as hotels. However, there is no recovery sign in sight for Chinese exports during 2H20 amid persistent weakness seen in global demand.
Due to positive signs foreseen in the Chinese economy during 2H20, we at KResearch expect that its GDP growth may improve over the 1.8 percent YoY contraction reported for 1H20, driven primarily by private consumption as a result of the government stimulus measures. In 2020, KResearch maintains our growth forecast for the Chinese economy at 1.0-3.0 percent (annualized growth) because there are numerous downside risks that may pressure its recovery, in particular geopolitical issues between China and the US.