Government has taken steps to keep overall prices within reasonable range

China is likely to see a notable rebound in economic growth in the second half of the year as a package of stimulus policy measures takes effect, but rising consumer inflation may pose a challenge, experts said.

The national economy is gradually recovering from recent COVID-19 shocks, they said, and the country will likely see positive growth in the second quarter.

Looking at the rest of the year, they expected the easing of strong fiscal policy and targeted monetary policy to prop up growth. This could include forceful infrastructure spending and stronger support for small and medium-sized enterprises and manufacturing.

Meanwhile, inflation in the cost of manufactured products in China rose in June at its slowest rate since March 2021. This was brought about with the help of the government's effective measures to reboot work and production reduced by the pandemic. The efforts were directed at stabilizing key industrial and supply chains and ensuring stable supplies and prices while leaving room for further stimulus policy measures to shore up growth.

Chen Weidong, director of the research institute at the Bank of China, said China's economy has gradually stabilized with the help of a series of government stimulus measures after a softening of economic activity since March amid resurgent domestic COVID-19 cases.

"We forecast that the Chinese economy will grow around 1 percent (year-on-year) in the second quarter, after expanding by 4.8 percent year-on-year in the first quarter," Chen said in a recent report on the Chinese economy and financial outlook.

As the pandemic's impact further eases and policy stimulus takes effect, the economy will rebound in both quarters of the second half, Chen said.

Wen Bin, chief economist at China Minsheng Bank, said China's GDP is likely to grow by around 0.5 percent in the second quarter, mainly fueled by the recovery in June amid a gradual resumption of work and production.

China's producer price index, which gauges manufactured product prices, increased 6.1 percent year-on-year in June, following a 6.4 percent rise in the previous month, the National Bureau of Statistics said on Saturday.

China's consumer price index, the main gauge of inflation, rose 2.5 percent year-on-year in June, compared with a 2.1 percent rise in May, according to NBS data.

Wen said consumer inflation came in slightly higher than market expectations, warning of pressures from rising pork prices, imported inflation risks and a gradual pickup in demand.

As for the second half of the year, he said his team expects consumer price index inflation to rise modestly and producer price index inflation to trend down, so inflation will not put significant pressure on monetary policy easing.

Compared with the soaring prices in other major economies, China's overall price level is generally stable. Inflation hit a new 40-year high in May in the United States, as the consumer price index rose 8.6 percent year-on-year, US Labor Department data showed.

The Chinese government has already taken solid steps to keep overall prices within a reasonable range. The National Development and Reform Commission, the country's top economic regulator, recently said it is considering releasing pork from central reserves and guiding localities to release extra stocks in a timely manner to prevent sharp increases in hog prices.

Liu Zhicheng, director of the commodity market division at the Chinese Academy of Macroeconomic Research's market and price institute, said there is little likelihood of further hog price gains in the next few months, considering factors such as China's sufficient supply, slowing pork consumption in July and August and the recent pig feed price declines.

Zhou Maohua, an analyst at China Everbright Bank, said the latest inflation figures show a steady recovery in domestic demand, especially in the services sector.

Citing some better-than-expected economic indicators in May and June, Zhou said China is likely to post growth in the second quarter. He called for more efforts to further resume production and ensure stable supplies and prices, and monetary policy easing to boost domestic demand, as well as stronger support for SMEs and key projects.

Source China Daily