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Chinese Businesses Predict Economy Will Shrink This Year

Chinese Businesses Predict Economy Will Shrink This Year

China, the world’s second-largest economy – which has reopened after months of lockdown – is expected to shrink this year, according to a survey, CNBC reported.

The independent survey of more than 3,300 businesses in the country revealed that the second-quarter (Q2) recovery from the first-quarter (Q1) decline has been minimal. The gross domestic product (GDP) contracted 6.8 percent in Q1, the survey said.

“Until and unless global demand recovers more forcefully, the incremental quarterly improvement just seen will make for a contraction for full-year 2020,” according to the U.S.-based China Beige Book. “No matter the lens, gains over Q1 are marginal.”

The total number of exports fell in May after an unexpected rise in April, researchers reported.

“We caution that the surge in exports of coronavirus-related medical supplies over the past two months was largely due to a jump in prices, which is likely unsustainable,” Ting Lu, chief China economist at Nomura, said in a report. “Overall, after a strong recovery between March and mid-June, we expect recovery momentum to get weaker in the next couple of months. We expect a bumpy recovery path filled with uncertainty, as China is caught between domestic policy stimulus, remaining social distancing rules and slumping external demand.”

The International Monetary Fund (IMF), the Washington, D.C.- based global organization comprised of 189 countries to foster global financial stability, predicted the global economy is set to decline 3 percent this year.

The forecast, released in April, predicted that the U.S. economy will contract nearly 6 percent this year, while China and India are the only countries out of 16 listed that are set to see growth, by 1.2 percent and 1.9 percent, respectively.

The Chinese government is trying to shift the economy’s reliance more toward domestic consumption, in part because exports accounted for nearly 20 percent of the national GDP in 2018, according to World Bank data.

But China Beige Book’s early look at Q2 growth said that any domestic consumption boost may still fall short on a national level, CNBC reported.

While China’s economy in the last several months included some good news, such as increased online shopping, Chinese consumers are not necessarily ready to spend in a big way.

Last week, PYMNTS reported that China’s biggest online shopping event since COVID-19 netted $136.5 billion for two of the nation’s eCommerce giants.

Alibaba Group Holding Ltd., the global technology company specializing in retail, and JD.com Inc., the Beijing-based online shopping site, saw record sales during the annual 618 sale, named for the date that it ends, June 18.

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