China is expected to release positive second quarter economic data Thursday but analysts warned that uncertainties could still derail the upward trend.
Despite its fast recovery, analysts said China might increase fiscal spending to ensure it hits its economic growth targets this year.
The People's Bank of China said it expected slowing conditions after it said it would cut the reserve requirement ratio last week. Analysts have been calling for further monetary and fiscal policy stimulus because there were signs of slowing growth after a rebound from lows experienced last year during the height of the pandemic.
Compared with other large economies, China's economy is expected to grow by around 8% year on year for the second quarter, according to mainstream forecasts. Despite the impressive figure, analysts said impending problems still loomed - including the possible slowing of imports, bad loans and weaker consumption.
Preliminary data indicates that China's exports had grown by 32.2% year on year in June. Analysts said the government's main task for the rest of the year was to ensure continued growth through risk prevention and economic stabilization.
"China's fast economic momentum since last year after successfully containing the local spread of Covid-19 may gradually lose steam. One of the issues for the second half is how supportive the government policies will become after realizing the possible economic slowdown down the road," analysts said.
The Bank of Communications - the fifth-largest bank in mainland China -said it expects the economy to grow by 8.8% this year. However, the bank warned that external uncertainties still lie ahead and the country needs to navigate those uncertainties carefully. The bank said some risks include China's deteriorating relations with the U.S., market volatility and "de-globalization."
The bank estimates China will have about $3 trillion of fiscal capital available in the second half of the year. It said that it may be used to accelerate fiscal expenditure. The bank said it forecast an increase of 15% for consumption this year.
China's economy grew by 2.3% last year as the world struggled with the health crisis. The country set a more conservative goal this year of "above 6%," which is significantly lower than market estimates.
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