This undated file photo shows the Lujiazui area of Shanghai which is home to major global financial organizations. (PHOTO PROVIDED TO CHINA DAILY)
China’s “dual circulation” development pattern as well as its accelerating 5G deployment will provide a strong foundation for a robust recovery from the fallout of the COVID-19 pandemic, analysts said on Monday.
“There are encouraging signs that the worst of the coronavirus pandemic is over for the domestic economy,” Tang Zhenyi, chief executive officer of Credit Suisse China, told the 11th annual Credit Suisse China Investment Conference held online.
The new “dual circulation” development pattern, in which the domestic market serves as the mainstay while domestic and foreign markets boost each other, was introduced earlier this year to bolster the country’s economic resilience, as well as that of the world
“The Chinese government has adopted a swift yet disciplined response to contain the virus outbreak and boost the economy, with sufficient room for macro policy adjustments if necessary,” Tang said. “This bodes well for the country’s entrepreneurs. We have full confidence in the resilience of Chinese entrepreneurs and their ability to weather the challenges ahead.”
The new “dual circulation” development pattern, in which the domestic market serves as the mainstay while domestic and foreign markets boost each other, was introduced earlier this year to bolster the country’s economic resilience, as well as that of the world.
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Edmond Huang, head of Hong Kong and China research and China equity strategy at Credit Suisse, said the “dual circulation” development model will further boost the consumption sector, a major driver for Chinese economic growth.
Ten years ago, when the global financial crisis broke out, the Chinese government poured large investments into infrastructure as its major stimulus measure to lift the economy out of the difficulty. This time, however, many government measures have been taken to stimulate domestic consumption, he said.
“We observe clear trends of recovery in consumption, with the year-on-year growth rate of retail sales back to positive territory for two consecutive months,” Huang said.
He said the sales of major retailers and catering companies during the National Day holiday increased 4.9 percent year-on-year, suggesting a good recovery of consumption despite certain restrictions.
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“We expect the consumption recovery to continue with robust momentum, on the back of pent-up demand from consumers, a gradual relaxation of restrictions and a ramping-up of demand from businesses, unless there is further disruption from another wave of the virus,” Huang said.
Erica Poon Werkun, head of securities research at Credit Suisse Asia-Pacific, believes China’s investment in digital infrastructure, such as 5G technology, will help its businesses adapt to a “new normal” in the post-pandemic era, as the public-health crisis pushed more business operations online.
The acceleration of the offline-to-online transition will give a boost not only to existing internet leaders, but also to smaller players, as the overall online addressable market expands rapidly, she said.
“Other online services such as gaming and payments have also been growing rapidly,” Poon said “We expect to see more investment in this area, as well as increasing integration with the offline world, partly supported by the deployment of new 5G devices.”
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