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China 1st Economy to Grow Since Virus  07/16 06:06

   China became the first major economy to grow since the start of the 
coronavirus pandemic, recording an unexpectedly strong 3.2% expansion in the 
latest quarter after anti-virus lockdowns were lifted and factories and stores 
reopened.

   BEIJING (AP) -- China became the first major economy to grow since the start 
of the coronavirus pandemic, recording an unexpectedly strong 3.2% expansion in 
the latest quarter after anti-virus lockdowns were lifted and factories and 
stores reopened.

   Growth reported Thursday for the three months ending in June was a dramatic 
improvement over the previous quarter's 6.8% contraction ---China's worst 
performance since at least the mid-1960s. But it still was the weakest positive 
figure since China started reporting quarterly growth in the early 1990s.

   "We expect to see continuous improvement in the upcoming quarters," said 
Marcella Chow of JP Morgan Asset Management in a report.

   China, where the coronavirus pandemic began in December, was the first 
economy to shut down and the first to start the drawn-out process of recovery 
in March after the ruling Communist Party declared the disease under control.

   "The national economy shifted from slowing down to rising in the first half 
of 2020," the National Bureau of Statistics said in a statement.

   Asian financial markets fell despite the show of strength by the region's 
biggest economy as investor enthusiasm following announcements about research 
into a possible coronavirus vaccine receded.

   China's market benchmark, the Shanghai Composite Index, was down 1.4% at 
midday. In Tokyo, the Nikkei 225 lost 0.7%. Hong Kong's Hang Seng declined 1.4% 
and the Kospi in South Korea fell 0.8%.

   Economists say China is likely to recover faster than some other major 
economies due to the ruling Communist Party's decision to impose the most 
intensive anti-disease measures in history. Those cut off most access to cities 
with a total of 60 million people and suspended trade and travel --- steps 
later imitated by some Asian and European governments as the virus spread.

   Manufacturing and some other industries are almost back to normal. But 
consumer spending is weak due to fear of possible job losses. Cinemas and some 
other businesses still are closed and restrictions on travel stay in place.

   "The pandemic is creating winners and losers," said Bill Adams of PNC 
Financial Services Group in a report. "Manufacturing is leading China's 
recovery."

   In light of the latest data, Chinese leaders are "likely to keep the current 
policy stance largely unchanged," said Larry Hu and Xinyu Ji of Macquarie 
Capital in a report.

   The International Monetary Fund is forecasting China's growth at 1% this 
year. That would be the weakest since the 1960s but better than the Fund's 
outlook for an 8% contraction in U.S. output and a 4.9% decline for the world.

   Private sector analysts say as much as 30% of China's urban workforce, or as 
many as 130 million people, may have lost their jobs at least temporarily. They 
say as many as 25 million jobs might be lost for good this year.

   The ruling party promised in May to spend $280 billion on meeting goals 
including creating 9 million new jobs. But it has avoided joining the United 
States and Japan in rolling out relief packages of $1 trillion or more due to 
concern about adding to already high Chinese debt.

   China has reported 4,634 coronavirus deaths and 83,611 cases. No 
domestically transmitted cases have been reported since an outbreak in Beijing 
that infected more than 330 people before it faded early this month.

   On Tuesday, the government eased some curbs on domestic tourism after China 
reported no new locally acquired infections in nine days. The Ministry of 
Culture and Tourism said tourist sites can allow 50% of their daily visitor 
capacity, up from 30%, and tours from one province to another can resume.

   In the three months ending in June, factory output rose 4.4%, rebounding 
from the previous quarter's 8.4% contraction after factories that make the 
world's smartphones, shoes, toys and other goods reopened.

   Retail sales shrank by 3.9%, but that was a marked improvement over the 
previous quarter's 19% contraction while millions of families were confined to 
their homes and shopping malls were shut down. Online retail sales rose 14.3%, 
up from the previous quarter's 5.9%.

   June exports grew by an unexpectedly strong 0.4% but still are off 3% for 
the first half of the year. Imports rose 3% --- including a 10.6% jump in 
purchases of U.S. goods despite a tariff war --- but are down 3.3% so far this 
year.

   Forecasters warn exporters are likely to face another decline in demand as 
sales of masks and other medical supplies taper off and U.S. and European 
retailers cancel orders.

   "This suggests sustained pressure on employment, currently the government's 
foremost policy priority," said JP Morgan's Chow.

   A potential stumbling block is worsening relations with the United States, 
China's biggest national export market, over disputes about trade, technology, 
human rights and Hong Kong.

   The two governments signed an agreement in January to postpone further 
tariff hikes in their fight over Beijing's technology ambitions and trade 
surplus. But most increases already imposed remained in place.

   "The darkest moment is behind us, but given the huge uncertainties from the 
COVID-19 and the global economy, it's too early to say that China is out of the 
woods," said Macquarie's Hu and Ji.

 
 
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