Since October,market views have diverged on the outlook of China’s economic recovery: the first type of view believes that economic recovery will continue,the second holds that the economy has already showed signs of overheating, &the third states that the economy is peaking. 1/7
This essay by CF40 research fellow Zhu He reviews four basic facts of China’s economic recovery since the outbreak of COVID-19 and discusses the possible reasons behind the three different views. cf40.com/en/news_detail… 2/7
Fact 1: Policy forces have played an important role in this round of credit expansion. But whether the momentum of this round of expansion will sustain after policies exit depends on how large role policies have played so far. This is the first divergence in the market. 3/7
Fact 2: Property sector has shown great resilience. Whether the property sector can remain resilient in the context of tightening monetary policy and controls on the scale of debt owned by real estate companies is the second divergence regarding China’s macro outlook. 4/7
Fact 3: Strong export performance significantly exceeds market expectation. Whether the rebound in exports can sustain is another key factor in macro performance in the rest of this year. 5/7
Fact 4: Infrastructure construction did not meet expectation while consumption recovery was sluggish. The third divergence in judging China’s macroeconomic outlook arises as to whether infrastructure investments will turn out to hamper economic growth in 2021. 6/7
In summary, the divergent understanding and predictions of the macroeconomic situation and policy responses going forward shaped opinions with regard to the Chinese economy’s performance in the coming year. This will allow us to make more focused and in-depth discussions. 7/7
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