China's pro-growth policies may extend into second half

An expert expressed confidence in China's economic recovery and predicted the government's pro-growth policies to extend into the second half of this year.

The troika of exports, investments and consumption had a mixed performance in the first half of this year, Guo Lei, chief economist at GF Securities, said during an interview with The Paper.cn.

China's exports showed strong resilience. Data from the General Administration of Customs showed that China's exports logged a better-than-expected double-digit increase of 15.3 percent in May, versus 1.9 percent in April. In the first five months, exports grew 11.4 percent year-on-year.

Exports in some new sectors, such as automobiles and solar cells, registered 87 percent and more than 100 percent respectively, during the first quarter. In the second quarter, China's exports should jump about 11 percent, compared with nearly 16 percent in the first quarter, Guo predicted.

Investment performance is neutral. Official data showed China's fixed-asset investment jumped 6.2 percent from a year earlier to 20.6 trillion yuan in the first five months. 

Growth in consumption was relatively weaker. Retail sales, a major indicator of consumption strength, continued falling in May but saw a narrower decline of 6.7 percent, thanks to the gradual improvement of domestic demand. In the January-May period, China's retail sales of consumer goods stood at 17.17 trillion yuan, down 1.5 percent year-on-year.

Looking forward, Guo is confident that China's economy will recover in the short term. Some indicators such as subway passenger traffic among major cities and freight volume are improving, Guo said, adding there is some room to see these data continue to favorably shift in the future.

However, after the domestic economy recovers to a certain level, it may reach a new balance point, which will constrain further upwards momentum to a certain extent, Guo said.

Constraints mainly come from domestic and overseas market demands, he explained. On one hand, declines in overseas inventory will have some effect on China's exports; on the other hand, with the COVID-19 impact wearing thin, there is a ceiling effect on consumption.

In terms of fiscal and monetary policies, Guo said the top priority for this year's countercyclical policy should be fixed-asset investment. There is high probability that the government's pro-growth policies are expected to extend into the second half of this year, he added.