China: GDP still expected to expand more than 9% in 2021 – UOB

Economist at UOB Group Ho Woei Chen, CFA, assesses the latest set of Chinese data releases.

Key Quotes

“China’s 2Q21 GDP growth was marginally below expectation at 7.9% y/y as it moderated from 18.3% y/y in 1Q21 but underlying momentum has remained fairly strong at 1.3% q/q (Bloomberg est. 8.0% y/y, 1.0% q/q SA), picking up from downwardly revised 0.4% q/q in 1Q21 (from 0.6% q/q previously). Overall, the economy grew by 12.7% y/y in 1H21.”

“June economic indicators showed growth in retail sales, industrial production (IP) and urban fixed asset investment (FAI) slowing but were all above expectations. The month-on-month growth for these indicators have also kept up with gains in May, suggesting that the outlook has remained largely stable.”

“China’s GDP growth rate will continue to normalise in the coming quarters as the favourable base effect diminishes. The greater concern is the uneven growth recovery. China’s internal circulation growth strategy is dependent on stronger recovery in domestic consumption. This will reduce its vulnerability to external risks. We maintain our GDP growth forecast for China at 9.1% this year, which factors in further moderation in the headline growth rate to around 6.0% in 2H21.”