China Economy: GDP Could Still Grow 3% In 2020 Amid Coronavirus Recovery

Chinese GDP could grow 3% this year, as Asia’s largest economy recovers from the ongoing coronavirus pandemic, Zhang Ming, a researcher at the Chinese Academy of Social Sciences think tank, said Tuesday in an online event. Zhang, a Senior Research Fellow at the government-run Academy, specializes in Chinese macro-economics and international finance.

Zhang said interest rate cuts by China’s central bank could boost the country’s economic expansion. He believes the bank will cut the one-year Medium Lending Facility (MLF) rate and the Loan Prime Rate, a preferential interest rate offered by a commercial bank to its prime customers.

In May, the Chinese government announced it would issue 3.75 trillion Chinese yuan ($526 billion) in special government bonds to jump-start infrastructure spending. China has been ramping up infrastructure projects this year in areas such as public health, along with 5G networks and data centers.

In the first quarter of 2020, the Chinese economy contracted by 6.8%, the first drop since Beijing began reporting quarterly GDP growth in 1992. Zhang said a plunge in foreign orders could weigh on the Chinese manufacturing sector in the second half of the year.

"It would be very tough for the manufacturing sector in the second half,” Zhang said. “Real estate is resilient, but property investment will not rise sharply, as the tone of policy tightening will not be fundamentally reversed. Therefore growth will have to mainly depend on infrastructure.”

Ho Woei Chen, an economist at UOB Group, forecasted full-year growth of 1.8%.

A second wave of the coronavirus could put China’s economic recovery in doubt. An outbreak at Beijing’s Xinfadi market has resulted in more than 100 cases of the virus in the capital region since Thursday. Beijing has gone into a “wartime” mode, closing schools and setting up 24-hour security checkpoints.

"Beijing will take the most resolute, decisive, and strict measures to contain the outbreak," Xu Hejian, spokesman for the Beijing municipal government, told reporters on Tuesday.

“The risk [of a second wave pandemic] has begun to show up,” Ding Shuang, chief Greater China economist for Standard Chartered Bank, told the South China Morning Post. “If disseminated to other provinces, it would create a bigger problem and may force a re-assessment of the country’s economic recovery.”

Earlier this month, the Wall Street Journal cited economists in China and Hong Kong who estimated that "as many as 80 million people were out of work during the worst of China’s coronavirus lockdown." The Journal also noted that "the Chinese government has barely expanded its formal social safety net."

The coronavirus likely originated at an animal and seafood market in the Chinese city of Wuhan and has since spread across the world. According to Johns Hopkins University, there are 84,378 cases of the coronavirus in China as of 3 p.m. ET, with a death toll of 4,638.