China View: Surging exports and resilient real estate investment continue to drive China's growth | The Conference Board
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EXECUTIVE SUMMARY

China View: Surging exports and resilient real estate investment continue to drive China's growth
  • Status of COVID-19 Recovery – Uneven global economic recovery, production resumption, and freight disruptions have resulted in widespread supply shortages. This has intensified raw-material inflation, and it also has boosted trade demand in general for countries and companies that can meet the demand. This dynamic continues to produce strong export performance for China. Producer price inflation has been concerning for the last few months. Recent government intervention may work to tamp it down.

  • Investment Trends – An uptick in real estate investment growth in April proved again the sector can be resilient to restrictive financing regulations over the short term. Manufacturing investment growth also bounced up from a low level, but remains weak overall. 

  • Consumption Trends – Recovery growth in retail sales remains weak. Tourism data from the May holiday suggest that consumer concerns regarding COVID are diminishing but sluggish income growth is dragging consumer confidence.   

  • Trade Trends – China’s export growth accelerated unexpectedly in April. Pandemic surges in emerging markets as well as the pace of economic re-opening in advanced economies cloud the outlook for exports looking forward. Some moderation in Chinese export growth is probable in the 2H.

Implications for Business

China's economic growth at present is essentially driven by export growth and real estate investment, period. Both drivers are likely to be resilient over the short term, basically ensuring that China’s Q2 GDP growth will be strong. However, both growth drivers are arguably unsustainable. Slumping consumption growth and weak manufacturing investment raise concerns about the longer-term picture. Slowing household income growth presents a serious constraint. Members should carefully parse the hyperbole of China’s standout recovery as reported in the global business media against the realities of China’s imbalanced and unsustainable composition of growth at the present time.

 

 

For access to the full report, please contact our research or membership staff listed on the last page of the downloabable Executive Summary PDF.

 

AUTHOR

YuanGao.jpg

Yuan Gao

Senior Economist, China Center for Economics and Business
The Conference Board


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