China's V-shaped economic recovery continues in June led by strong domestic demand: expert

WASHINGTON - China's V-shaped economic recovery continued for a fourth consecutive month in June, led by strong domestic demand, according to a US investment expert.

The recovery of sales of autos and homes in China last month reflects that "middle-class and wealthy consumers have both sufficient money and enough confidence in the future to spend it", Andy Rothman, investment strategist at San Francisco-based investment firm Matthews Asia, wrote Thursday in an analysis about China's economic resilience.

"China's economy is increasingly driven by domestic demand, so it is important that consumer spending has continued to bounce back," Rothman said, adding the improvement in consumer spending and sentiment has come in advance of a full recovery in income, suggesting a fairly high degree of confidence in the future.

Rothman also noted that this healthy economic recovery has come without a dramatic stimulus, as credit growth has only accelerated modestly and the Chinese government's long-running effort to de-risk the financial system continues.

"Unemployment remains a concern, but the absence of social unrest and the continuing rebound in consumer spending suggests that the government's support for workers and businesses has provided a cushion for many who lost their jobs, laying the foundation for an economic recovery," the investment expert added.

Noting that restaurant and bar sales in China were still down last month, Rothman said these businesses that require customers to gather in confined spaces are likely to take a long time to fully recover.

"This is why I expect China's economic activity to return to about 80 percent of normal by the end of this year, with the final 20 percent of the recovery unlikely until after an extended period time with very few new COVID cases in China, the global pandemic under control, or the development and widespread use of an effective vaccine," he said.

Rothman's comments came after China on Thursday reported its gross domestic product (GDP) expanded 3.2 percent year-on-year in the second quarter of 2020, reversing from a 6.8-percent contraction in the first quarter.

"Whether the V-shaped economic recovery described here continues depends primarily on the Chinese government's ability to continuing keeping the coronavirus under control. At this point, there are reasons to be optimistic," Rothman said.