Positive growth anticipated in Q2
China will likely post positive economic growth in the second quarter of the year, and growth is projected to pick up in June with the gradual resumption of work and production, according to economists and analysts.
They said policymakers will introduce more policy easing such as stronger support for infrastructure, more supplementary fiscal relief and a lowering of banks' actual lending rates to cushion the impact of COVID-19 and stabilize overall growth in the coming months.
Their comments came as China's producer prices rose in May at their slowest rate since March 2021, as the government took steps to coordinate COVID-19 control measures with economic development and stabilize industrial and supply chains in key sectors, leaving room for more policy stimulus to shore up the economy.
Zhong Zhengsheng, chief economist at Ping An Securities, said the economy is gradually returning to normal, and China will likely see positive growth in the second quarter as the impact of the pandemic gradually eases and the government implements more measures to stabilize growth.
"For China's economy, the worst moment might be over, and the country's economic recovery is expected to accelerate in June," Zhong said.
China's producer price index, which gauges factory-gate prices, increased 6.4 percent year-on-year in May, following an 8 percent rise in the previous month, the National Bureau of Statistics said on Friday.
China's consumer price index, the main gauge of inflation, rose 2.1 percent year-on-year in May, unchanged from April, the NBS data showed.
Lu Ting, chief China economist at Nomura, said both PPI and CPI inflation for May were largely in line with market expectations and his team expects PPI inflation to trend down and CPI inflation to rise modestly.
"Due to weak demand, supply disruptions in China since early March as a result of the resurgence of COVID-19 have not led to a rapid rise in domestic inflation," Lu added.
In fact, compared with soaring prices in other major economies, China's overall price level is within a controllable range. The inflation hit a new 40-year high in May in the United States, as the CPI rose 8.6 percent year-on-year, the US Labor Department data showed on Friday.
Wen Bin, chief researcher at China Minsheng Bank, said China's overall inflation level is generally controllable, suggesting that the nation has room to step up macro policy support.
Warning of downward pressure facing China's economy, Wen said the government needs to forcefully implement macro policies to stabilize growth and ensure economic growth within a reasonable range in the second quarter. More efforts should also be made to boost credit supply to the real economy, ensure supplies and stable prices, and prevent imported inflation risks.
The State Council recently unveiled a total of 33 measures covering fiscal, financial, investment, consumption and industrial policies to further stabilize the economy.
China's credit expansion improved in May as the impact of the pandemic gradually eased. The increment in aggregate social financing－the total amount of financing to the real economy－was 2.79 trillion yuan ($420 billion) in May, up 839.9 billion yuan compared with the same period last year, the People's Bank of China, the country's central bank, said on Friday.
Monetary conditions have been loosened as China's broad money supply, or M2, stood at 252.7 trillion yuan as of the end of May, up 11.1 percent year-on-year. The growth rate is 0.6 points higher than a month earlier, the central bank said.
Looking ahead, Robin Xing, Morgan Stanley's chief China economist, said policymakers may introduce more pandemic fiscal relief or bring forward some 2023 construction bond quotas to this year.