China’s economy contracted in the three months to June from a year earlier, signaling the start of a recession despite marginal improvements over the previous period when the coronavirus roiled the economy, according to China Beige Book.
Key metrics including manufacturing profits, capital expenditures and retail sales volumes remained at historically low levels and barely improved from those in the first quarter, CBB International said in a quarterly report based on a survey of more than 3,300 firms.
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The retail sector fared the worst, with revenues and profits extending sharp falls. A steep decline in credit costs seemingly didn’t encourage struggling retailers to borrow, signaling continued weakness in the sector. In contrast, the manufacturing sector expanded over the first quarter and services sector performed the best.
Sluggish global demand remained a key drag on growth, with regions more internationally exposed performing worse, while interior regions received a boost from a marked rebound in domestic orders, according to the report.
“The eventual return to growth does not mean a return to anything approaching the old levels of growth,” the firm said in its quarterly report on China’s economy. “Until and unless global demand recovers more forcefully, the incremental quarterly improvement just seen will make for a contraction for full-year 2020.”
That pessimistic view contrasts with the outlook of most economists and the government, who all expect the economy to return to growth this quarter and to expand this year.
China’s Slow Reboot Points to Hard Road Back for Global Economy
The latest official data showed China’s economy continued to inch out of the coronavirus slump in May, driven by a recovery in industry amid sluggish consumer demand. China’s economy contracted 6.8% in the first quarter.
The report was based on 3,304 interviews conducted in China mid-May to mid-June. Official gross domestic product data for the second quarter is due for release on July 16.