China’s GDP could shed light on the superpower’s post-Covid recovery

Tomorrow morning, July 15th, 2021, China will release its quarterly GDP report. Led by manufacturing and exports, China has enjoyed a uniquely powerful impetus over the past two decades. As the world’s second-largest economy today, investors have recognised China as an essential element in the global financial markets and global economy.

Last year, China was first-in, first-out of the COVID-19 pandemic and benefitted the most from a quick recovery in its economy. Because of that, China’s A-share (ASHR, +37% in 2020, +62.67% 5-year performance) and Technology Stock (KWEB, +55.66% in 2020, +78.55% 5-year performance) both had tremendous returns for investors. 

Investors believe that the prosperity of China’s economy will bring significant value to its stock market in H2, 2021. However, the fact is the stock markets have not really moved since the beginning of the year. This is due to the fact that in the first quarter of 2021, China’s GDP increased by 18.3% year-on-year, 0.6% from the previous quarter, reflecting that China’s economic recovery momentum has been gradually returning to a normal pace. China’s latest May economic indicators also reflect the country’s economic growth moderates. 

As a significant percentage change in the GDP can have a direct impact on the financial markets, upcoming Q2 GDP data out of China has become extremely important to both economists and investors.

Despite some economic indicators, which fell short of expectations in May, the data still shows that China’s economic recovery has remained steady and resilient. 

On the other hand, China’s manufacturing and services PMI have both been above the thresholds (>50) for 15 consecutive months, indicating a continued expansion of China’s economic productivity. 

Moreover, China has administered more than 1 billion doses of vaccines and will continue to support the reopening of the economy and accelerate the process of returning people’s lives to normal. 

The World Bank recently forecasted that China’s economic growth could reach 8.5% this year as well as the growth attributed to an increase in consumer demand over time. Overall, China’s Q2 GDP outlook remains positive. 

Investing in Chinese Markets

For investors interested in exploring these investment opportunities, eToro offers China-focused ETFs, such as KWEBASHRFXI, and MCHI. Also, our recent research shows China accounts for over half of all global online sales — more than the next nine countries combined. Half of all China’s retail sales are forecast to be online this year, with online expected to be +20%, despite an already world-leading online penetration rate and increased regulations.

Sources: 

http://www.stats.gov.cn/english/PressRelease/202106/t20210616_1818424.html 

http://www.stats.gov.cn/english/PressRelease/202104/t20210420_1816603.html

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