According to the main indicators, the Chinese economy could face stagnation in the near future. The world's second-biggest economy saw a sharp decline in the second quarter. In the third quarter, this trend is likely to continue, Christophe Barraud, chief economist at Market Securities LLP, predicts.
The reason for such a steep slowdown in the country's economic growth could be the outbreak of the COVID-19 Delta variant, and more specifically, tough measures taken by the Chinese government to contain its spread, the expert notes. In addition, the economy is nearing stagnation due to tighter regulations on China’s property market, Barraud emphasizes. Notably, following an uptick in cases of the Delta variant, the authorities imposed new severe curbs on travel in order to gain control of the epidemic. However, these measures were not enough, and the southern part of China became a new epicenter of infections. That is why restrictions are expected to persist, while consumers are likely to be somewhat cautious.
Barraud believes that third-quarter GDP growth will hardly exceed 0.3% compared to the indicator for the second quarter, which is well below the median estimate of 1.1% in a Bloomberg survey of economists. He is also pessimistic about China’s economic expansion for 2021. In his opinion, the annual figure is unlikely to rise above 8% if there is another outbreak of the COVID-19 Delta variant in the fourth quarter. At the same time, the Chinese government has set an economic growth target at above 6% for the current year. In the second quarter, the country's GDP rose by 7.9% from the same period in 2020 and by 1.3% from the previous quarter.
