Fitch Rating sees a positive spillover from China's well-performed recovery
Updated 13:08, 17-Jul-2020
By Hu Binyi
07:49

China's economy experienced a volatile first half, but the country reported a 3.2-percent economic growth in the second quarter of the year, compared to a year ago, which means China has emerged from the COVID-19 crisis.

China's service sector has recovered with good momentum. Modern and high-tech service industries like information transmission, software, and IT services recorded double-digit growth, rising 14.5 percent year on year. In contrast, the retail sales dropped 11.4 percent in the first half-year.

Senior director of Sovereign Ratings of Fitch Ratings, Andrew Fennell, said that the consumer is the lagging area.

"If you looked at some data from the dragon boat festival, which happened in June, we can see that activity in spending from tourists is still below where were in 2019… we would expect that this economic recovery is going to continue into the second half of this year," he noted.

VCG

VCG

Fitch Rating early forecast the global economic growth to slide 4.6 percent this year. Meanwhile, the agency has raised its 2020 full-year growth forecast for China by half a percentage point from 0.7 percent to 1.2 percent.

With the pandemic still raging around the rest of the world, Fennell said there is still a risk of local outbreaks in China that has the potential to pose unexpected downside risks in the second half of this year. Also, he expected that some negative spillovers from a sort of weak external demand in China. But obviously, China is on the path of recovering.

"China is recovering more quickly than many anticipated, that does have positive spillover, and it is positive for global activity as a whole…we forecast there to be no change despite more than one-third of the countries have negative revisions to growth. That's simply because China and three other countries had upward revisions. So, I think that just kind of underscores the outsize impact that changes in economic activity in China have for the globe as a whole," he said.

However, the pandemic has raised calls for retrenchment supply chains. Fennel told CGTN that it is a multi-year trend, and the trend is accelerated by the rising tariffs and trade tensions between the U.S. and China.

"If go back a number of years, with rising labor costs in China, and also a desire to pivot towards more high value-added manufacturing," Fennel said, adding another factor is that many countries around the world seeing massive supply disruptions, so that want to bring some manufacturing for essential goods back to home or even closer.