China's central bank on Monday cut benchmark lending rates by the steepest margin since August 2019 when the market-oriented loan prime rate regime was adopted. The nation is striving to repair the damage of the coronavirus outbreak,which caused GDP to contract in the first quarter. Photo:cnsphoto

China's economy is likely to grow 2-3 percent in 2020 and above 5 percent growth in the second half, riding on the momentum of a speedy economic rebound that propelled China's second-quarter GDP to return to an expansion of 3.2 percent, Chinese economists said. 

The prediction comes after China reported better-than-expected economic growth rate for April-June period on Thursday, despite the headwinds caused by the COVID-19 epidemic. The number translated to a negative 1.6 percent growth rate in the first half of 2020. In the first quarter, China's GDP contracted 6.8 percent.

Liu Aihua, the spokesperson for the National Bureau of Statistics, said at a press conference in Beijing that China is confident of sustained economic recovery in the second half of 2020. 

"China has the fundamental, the potential and the condition to support such recovery," Liu said, noting that the steady recovery in the first half of the year has laid a solid foundation for an all-around revival of the economy in the second half.

She noted that China has a complete industrial chain, solid basic infrastructure and a market of colossal size, which will help cope with the fallout of coronavirus outbreak.

Liu acknowledged that the world's second-largest economy is still facing pressure to grow as some economic indicators remain lukewarm. The spread of the COVID-19 pandemic globally also poses a challenge as overseas demand is curtailed. 

Tian Yun, vice director of the Beijing Economic Operation Association, told Global Times Thursday that the uptick in the second quarter bodes well for the whole year and it is likely that the economic growth rate could achieve around 6 percent in the third and fourth quarters of 2020. 

"For the whole year, it is likely that we could see a growth rate of 3 percent, as the second half of the year accounts for more than half of China's annual economic output," Tian said. 

Liao Qun, chief economist at China CITIC Bank in Hong Kong, predicted economic recovery will gain further traction in the second half of the year, reaching a 5-6 percent growth rate. Overall, the whole-year GDP will likely amount to a 2 percent growth.

But analysts also warned that the sluggish demand at home and abroad under the clouds of the global pandemic could weigh on the economy in the next six months. Liu said at the press briefing that recovery on the supply side comes faster than on the demand side. 

"Consumption - the chief engine of the Chinese economy - is climbing, but at a slower-than-expected rate. We don't see momentum in releasing pent-up demand to date," Tian said.

In June, China's social retail sales dived 1.8 percent to 3.35 trillion yuan ($480 billion), marking the sixth consecutive month that the index remained in negative territory.

Tian noted that the coronavirus outbreak had incurred about 1,000 yuan in losses for every Chinese person on average so far. That money should have gone into consumption and it is therefore hard to recoup and make up for such losses.

Liao also added that the grip of the pandemic is still on the economy. "It is perhaps not the virus itself, but the restrictive measures we had in place to contain the pandemic that pose threats to the economic recovery in the coming months."

At the press briefing, Liu noted that Chinese policymakers will "moderately adjust" macro policy and maintain a certain level of flexibility in the second half of the year. Analysts expect that macroeconomic policies will lean toward supporting employment.

It is likely that China's central bank will reduce banks' required reserve rate (RRR) by 25 basis points in the second half of the year, while leaving interest rates intact to shore up the economy, analysts said. China's equity market is expecting an upwards trend, backed up by a relatively loose market liquidity level.