Consumption picks up in post-COVID China

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A first this year since the start of the epidemic: consumption in China rose in August over one year, confirming a gradual return to normal in the world’s second-largest economy.

China, where COVID-19 was spotted in December before spreading to the rest of the world, is the first country to relaunch its activity and it appears as a barometer as such.

In August, retail sales rose 0.5% year on year, the National Bureau of Statistics (SNB) said on Tuesday.

This key indicator of consumption plunged at the start of the year at the height of the epidemic (-20.5% over one year in January and February). And it has always been in decline, although more moderately in recent months (-1.1% in July).

Consumers were still hesitant to return to normal life, despite a marked improvement in the country on the epidemic front.

China only reported eight new cases of COVID-19 on its soil on Tuesday.

“The renewed consumer confidence suggests that the recovery in activity in the service sector will continue,” said analyst Julian Evans-Pritchard of Capital Economics.

However, some sectors are still struggling, such as hotels, restaurants and leisure, with an activity rate of 57%, according to the SNB, which however sees “a clear sign of recovery”.

To encourage consumption and ultimately support employment, many provinces or municipalities have launched commercial operations in recent months using vouchers or reductions.

Beijing has also stepped up efforts to encourage its exporters to target China’s large domestic market instead, while its major trading partners in Europe and the United States remain severely affected by the pandemic.

But demand for consumer goods remains in decline compared to last year over the first eight months of the year combined (-8.6%).

“China’s economic recovery is now on reasonably solid foundations,” notes analyst Louis Kuijs of Oxford Economics.

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