Experts S&P Global Ratings warned of imbalance in China’s economic recovery
The slow recovery of the service sector made China’s economic recovery slow, according to the chief economist of S&P Global Ratings.
|China’s exports showed good signs of recovery, while domestic consumption remained weak. Photo: AFP|
Tlove to use the domestic market remains weak
China is the only major economy to achieve growth in 2021 despite the difficulties caused by the Covid-19 pandemic. The country posted a 2.3% growth in the economy in 2020, but the performance of the sectors was uneven. For example, while exports showed a good recovery picture, domestic consumption continued to decline. “This is one of the most underestimated areas in the Chinese economic recovery; in fact it is imbalance,” said Shaun Roache, chief economist at the rating organization. international credit S&P Global Ratings said.
“China’s Covid-19 coping strategy has been successful from a medical perspective, but it is imposing a kind of long-term economic cost … which we see the service sector recovering much more slowly from. Those are boring jobs (service fields) and undermining consumer confidence, “Mr. Roache added.
This expert said that China’s retail sales have not recovered as before Covid-19. Incomplete figures for 2019, China recorded a monthly retail sales increase of over 8% year-on-year. However, the country’s sales have been steadily decreasing every month since March 2020 when the Covid-19 pandemic forced key sectors of the economy to close.
CNBC TV channel quoted Professor Michael Pettis from Peking University’s Guanghua School of Management, saying that the slow economic recovery was partly due to China’s policy responses to Covid-19. In particular, Chinese officials focus more on boosting the supply of the economy, which means many measures are taken to revive businesses and industries.
China’s response to Covid-19 was very different from the world because Beijing reacted as if it were a supply shock and almost all measures were directed at the supply. The imbalance in the recovery of industries and consumption in China is reflected in the latest inflation data published on March 10. Official data showed that China’s producer price index rose 1.7% in February from the same period last year, while the consumer price index fell 0.2%.
“While the rest of the world sees Covid-19 as a demand-side shock, it has introduced stimulus policies, boosts the distribution of income and the like, but China actually reacts as if It is a supply shock, “says GS. Michael Pettis added.
GS. Michael Pettis said that “it is very difficult to determine where domestic demand will come from”, only until there is a change in China’s policy focus. China said it wants to rebalance its economy with more focus on the domestic market. However, GS. Michael Pettis said that it is necessary to see how China will be successful after years of growth based on debt.