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China has avoided a recession after its economy grew by 3.2% in the second quarter of 2020 and can be counted as the first major economy to show a recovery from the damage caused by the coronavirus pandemic. The world’s second largest economy had shrank by 6.8% in the first three months of the year, the first contraction since the end of the Cultural Revolution in 1976.
A technical recession is defined as two consecutive quarters of contraction in gross domestic product. The data confirmed that China will probably be the first major economy to achieve positive economic growth, with the United States, the European Union as well as Japan still struggling to reopen their economies.
China’s whole-year GDP in 2020 could still be slightly lower than that of the US, but if the domestic chaos in the United States escalates, China's whole-year GDP could exceed that of US this year.
At the National People’s Congress in May, Premier Li Keqiang confirmed that China would not set an economic growth target in 2020.
The recovery in the second quarter is strong, but also highly uneven. Looking ahead, while the growth momentum would inevitably slow, GDP growth could rebound to around 5% for 2020, if the second half of 2020 maintains a level of sustained growth.
In other figures, recently released by the National Bureau of Statistics (NBS), industrial production, a gauge of manufacturing, mining and utilities, rose by 4.8% in June after a 4.4% rise in May. Retail sales, a key measurement of consumption in the world’s most populous nation, fell by 1.8%, better than the 2.8% decline in May. Fixed asset investment, a gauge of expenditures on infrastructure, property, machinery and equipment, fell 3.1% in the first six months of the year, an improvement from the 6.3% decline in the first five months.
The surveyed jobless rate in urban areas stood at 5.7% in June. This was down from 5.9% in May and the recent peak of 6.2% in February.
China’s government has set a target of creating 9 million new urban jobs in 2020, compared to 11 million last year, and maintaining an urban unemployment rate of around 6%, compared to 5.5% last year. In 2019, China created 13.52 million new urban jobs.
There is still a way to go in order to fully make up for the losses deriving from the pandemic, however, the recovery in the first half of the year has shown that the impact of the pandemic is controllable. We can have a certain level of confidence in a continued economic recovery in the second half of the year, which has the foundation, potential and conditions to be achieved.
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