China’s Economy to Accelerate with Expected 7.6% Growth in Q2

China’s economy is expected to accelerate in the second quarter of 2023, growing at a rate of 7.6%, according to a forecast from the Bank of China Research Institute. This represents an increase from the estimated 4.1% growth in the first three months of the year.

The think tank believes that the impact of the pandemic on the country’s economy and society will diminish further in the coming months, while investment in infrastructure and the manufacturing sector will continue to increase. Consumption is also expected to rise, along with a stabilization of the real estate market.

The report suggests that the low base of comparison is also a contributing factor to the stronger GDP growth in the second quarter.

The research institute estimated that China’s first-quarter GDP growth was 4.1%, boosted by adjustments to the country’s Covid-19 policies, and the revival of economic activity in the first two months of the year.

Following the Lunar New Year break in late January, companies picked up the pace amid a rise in demand, while employment and prices stabilized and market confidence returned. The housing market also saw a modest improvement, with commercial housing sales falling by 0.1% year on year in the first two months, and investment in property development dropping 5.7% annually.

However, the report notes that further observation is needed to ensure the continuity of the housing market’s recovery.

The report predicts that there will be less pressure on the People’s Bank of China to lower interest rates due to the continuous economic rebound, and the policy rate is expected to remain unchanged in the second quarter. The financing environment is expected to remain relatively loose, and M2 money supply and social financing will continue to grow.

The report also suggests that the authorities should strengthen policy support for developers’ fundraising and homebuyers while revoking unreasonable restrictions on house purchasing and loans. It also recommends expanding the supply of affordable rental housing to tackle accommodation-related issues affecting young people and those facing difficulties finding homes in large cities.

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