“The economic recovery is now on solid foundations”

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A first this year since the start of the epidemic: consumption in China rose in August over one year, confirming a gradual return to normal in the world’s second-largest economy.


The economy of the Middle Empire, ravaged by the coronavirus, is recovering.


© AFP
The economy of the Middle Empire, ravaged by the coronavirus, is recovering.


China, where Covid-19 was spotted in December before spreading to the rest of the world, is the first country to relaunch its activity. It therefore appears as a barometer for the rest of the world, still entangled in the immense problems linked to the pandemic.

In economic terms, encouraging news comes from the Middle Kingdom: in August, retail sales rose 0.5% year on year, the National Bureau of Statistics (SNB) announced on Tuesday. This key indicator of consumption plunged at the start of the year at the height of the epidemic (-20.5% over one year in January and February). And it had always been on the decline, although more moderately in recent months (-1.1% in July).

As a result, consumers were still hesitant to return to normal life, despite a marked improvement in the country on the epidemic front. In addition, the country reported on Tuesday only eight new cases of Covid-19 on its soil. “The renewed consumer confidence suggests that the recovery in activity in the service sector will continue,” said analyst Julian Evans-Pritchard of Capital Economics.

The hotel industry lagging behind

However, some sectors are still struggling, such as hotels, restaurants and leisure, with an activity rate of 57%, according to the BNS, which however sees it as “a clear sign of recovery”.

To encourage consumption and ultimately support employment, many provinces or municipalities have launched commercial operations in recent months using vouchers or reductions.

Beijing has also stepped up efforts to encourage its exporters to target China’s large domestic market instead, while its main trading partners in Europe and the United States remain severely affected by the pandemic.

But demand for consumer goods remains in decline compared to last year over the first eight months of the year combined (-8.6%). Industrial production for its part recorded an increase of 5.6% over one year, after that of 4.8% in July. Bloomberg analysts expected a less pronounced increase (+ 5.1%).

“China’s economic recovery is now on reasonably solid foundations,” notes analyst Louis Kuijs of Oxford Economics.

Employment suffers

As for investment in fixed capital, its growth was displayed over the first eight months of the year down 0.3%, according to the National Bureau of Statistics. This decline was however more attenuated than in July (-1.6%).

The unemployment rate, measured in China only in urban areas, stood in August at 5.6% against 5.7% the previous month.

Particularly monitored by the government, this figure de facto excludes the millions of migrant workers, weakened by the pandemic. The unemployment rate reached an all-time high in February of 6.2% of the urban labor force.

Sign of a difficult economic context, China created two million fewer jobs than last year over the first eight months of the year combined, according to the SNB.

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