China’s Central Bank said the country’s economy will swiftly return to its potential growth rate and there will be significant improvement in the coming three months. People’s Bank of China Deputy Governor Chen Yulu told reporters in Beijing, “Economic indicators will likely show significant improvement in the second quarter and the Chinese economy will return to potential output level rather swiftly.” Chen repeated earlier pledges to keep credit growth stable and make good use of the central bank’s targeted easing approach, and did not announce any new stimulus measures.
China was hit hard in February by the Covid-19 virus and the measures taken to stop its spread, with a historic slump seen across all economic indicators as quarantines and shutdowns stopped the movement of goods and people. Although activity has restarted it’s still not back at normal levels, with many services business struggling and the outlook for exporters grim as the outbreak covers the rest of the world.
“Based on payments, deposits and loan data since March, China’s real economy is improving somewhat due to earlier targeted monetary policies, ” Chen said. The PBOC will continue to direct funding to private and small firms as well as those critical to the supply chain, he said.
China’s surveyed unemployment rate jumped in March to 6.2 percent, indicating headwinds for local consumption ahead. The stock market has been more resilient than other global markets, with risks low and the impact of the virus being absorbed, said Li Chao, vice chairman of China’s securities regulator, who spoke at the same briefing. The currency will continue to stay at around 7 per dollar with movement on either side of that level, according to Chen.
While the virus’ impact on supplies and inflation will likely to continue for a while, price hikes will start to moderate as economy resumes, and inflation growth will slow from the second quarter and continue that way in the rest of the year, Chen said.