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China’s economy pulls away from the global downturn in Covid-19 as shoppers join the recovery

The world’s second largest economy has been in recovery mode for several months. Now consumers are starting to spend more, pushing retail sales up to 3.36 trillion yuan ($ 495 billion dollars) in August, up 0.5% from a year earlier. Although small, the gain marks the first time sales have increased in 2020.

Chinese authorities announced the increase at a monthly press conference on Tuesday, pointing out that the country is also seeing economic improvement elsewhere.

“The labor market has stabilized and travel restrictions have been lifted,” said Fu Linghui, a spokesman for the National Bureau of Statistics. “People are more willing to come out and use.”

China’s recovery makes it an outlier as the pandemic weighs for the rest of the globe.

The world̵
7;s largest economies – Canada, France, Germany, Italy, Japan, the UK and the US – have fallen dramatically in the first half of 2020. China was the only country that the International Monetary Fund expected growth this year in the June forecast – it is expected to level off an increase of 1%.

Careful recovery

China’s economy has bounced back since the $ 14 trillion economy fell 6.8% in the first quarter, the worst jump in a three-month period since China began publishing quarterly figures in 1992.

The country managed to avert a recession and grew by 3.2% in the second quarter as other major economies exhibited massive contractions. But these data showed signs of weakness – especially in retail, suggesting that Beijing still had difficulty convincing people to get out of their homes and splurge.
That now seems to be changing. Fu pointed out that China’s box office is recovering as authorities allowed cinemas to reopen in mid-July with ticket sales in August slightly more than half of what they were a year earlier. Cinemas had been closed for several months before the pandemic.
Car sales, meanwhile, rose nearly 12% in August from a year ago – a sign that the government’s efforts to encourage car purchases by distributing cash may work. Sales of residential properties also increased.

“Expenditure remains strongest among wealthier consumers, as evidenced by continued rapid growth in car and property sales,” Capital Economics economists wrote in a research note on Tuesday, although they noted that the data suggests the recovery is “expanding.”

Signs of growth

Tuesday’s data revealed other positive signs. Industrial production and capital expenditure rose in August, while unemployment rose slightly lower – 5.6% in August compared with 5.7% in July.

“This growth has brought some jobs back to the market,” said Iris Pang, chief economist for Greater China, in a research note.

“This is, in fact, the internal growth circulation that China is promoting,” she added, referring to Beijing’s recent focus on stimulating domestic demand and trying to reduce its dependence on foreign trade, capital and technology as tensions rise with the West.

However, the country still faces challenges. Unemployment is still higher than historical levels, and Beijing’s data do not include people in rural areas or a large number of the hundreds of millions of migrant workers.

Even Fu, the government’s spokesman, said on Tuesday that the country is still facing “high unemployment pressure” as a record number of new university graduates enter the job market. He said many of these people have had trouble finding a job because of the pandemic.

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