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22 Oct 2020

Econ Digest

The Chinese economy in 3Q20 grew 4.9%YoY…thanks to domestic consumption and exportation of medical and electronic products


The Chinese economy in the third quarter of 2020 grew 4.9%YoY, continuing the positive trend from the second quarter of 2020 in which a 3.2% growth YoY was seen. This expansion can be attributed to the gradual recovery of private consumption, particularly retail sales that grew 3.3% YoY in September after being seen to contract 14.01%YoY during the first half of 2020, and domestic tourism activities that have only recently regained their vigor, after the Chinese authorities announced a relaxation of travel restrictions within the country in mid-July 2020. In addition, the production of medicines, medical supplies and medical equipment corresponds with rising orders during this period in which the pandemic has run rampant across the globe. The work-from-home policy introduced in many countries has also helped to support demand for Chinese-made electronic products. As a result, China’s total exports in the third quarter of 2020 continued to expand at 8.8%YoY, following a slight expansion of 0.14%YoY in the second quarter of 2020.


KResearch views that the abovementioned momentum will continue to drive the Chinese economy to grow more than 5.0%YoY during the final quarter of 2020 (based on the assumption that a second wave of COVID-19 does not occur there). Nonetheless, this growth rate is notably lower than in the period before the spread of the COVID-19, owing to the fact that many product categories in China’s export sector which are not viewed as essential in the handling of the COVID-19 pandemic will be challenged by mounting risks amid the presently faltering global economy. Simultaneously, several economic indicators have yet to fully recover; these include net income growth rate, which continues to grow at a considerably slower pace than in the period prior to the COVID-19 pandemic to the extent that it may inhibit the recovery of private consumption.


Regarding the Chinese economy in 2020, KResearch stands by its previous view regarding the state of economic expansion in China through year-end, that such growth will be in the range of 1.0 – 3.0%YoY (with a median of 1.7%YoY) amid the numerous risks that China is currently facing, whether from any potential worsening of the COVID-19 pandemic, or the brewing geopolitical risk between China and the United States.

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Econ Digest