China Economic Quarterly Q2/Q3 2020

The economy has gradually recovered from the COVID-19 pandemic with 3.2% growth in Q2. It is expected to return to a relatively normal state in Q3.

This issue provides an overview of the macroeconomic trends in Q2/Q3 2020, some policy updates and hot topic analysis.



Here are some macro-economic highlights:

  1. GDP growth increased by 3.2% in Q2 and contracted by 1.6% in H1
  2. Total fixed asset investment declined by 3.2% in H1
  3. Total real estate investment decreased by 1.9% in H1
  4. PMI remained above the threshold of 50% in Q2
  5. The growth of industrial added values dropped by 1.3% in H1
  6. Total retail sales of consumer goods reduced by 11.4% in H1
  7. Imports and exports fell by 3.2% in H1
  8. PPI decreased by 1.9% and CPI increased by 3.8% in H1


Policy updates

Total aggregate financing to the real economy substantially increased

In order to support domestic economic growth, according to data from the People's Bank of China (PBoC), total aggregate financing to the real economy (AFRE) reached 20.83 trillion yuan during H1 which was 6.22 trillion yuan more than the same period last year. Total RMB loans to the real economy increased by 2.31 trillion yuan and reached 12.33 trillion yuan, the highest on record.

Fiscal spending decreased by 5.8% to 11.64 trillion yuan

As a result of the negative impact of the COVID-19 pandemic on GDP growth, and the measures to cut taxes and fees for enterprises, China’s general public budget revenue reduced by 10.8% in the first two quarters year-on-year, which is much less than the 14.3% drop in Q1 due to economic recovery in Q2. Budget revenue growth will probably remain positive in H2 as economic conditions are expected to improve.

Hot topic analysis: Amidst COVID-19, what’s next for China’s digital economy?

On 14 July, China’s National Development and Reform Commission (NDRC) together with 12 central government departments, released a guideline to support the digital economy, which has emerged as one of the key forces driving China’s economic development in the past few years. Particularly amidst COVID-19, the digital economy played an essential role during city-wide lockdowns. So, what is the definition and scope of the digital economy? How has the digital economy impacted China’s GDP growth in the past few years? How have different sectors of digital economy performed during COVID-19? Where will digital economy go post-pandemic?

  • The digital economy contributed to more than 60% of China’s GDP growth rate in 2019
  • Telecommunications revenue went up by 19.3% in H1 2020
  • Software revenue reached 3.56 trillion yuan in H1
  • Revenue generated from the Internet sector increased by 14.9% in H1  
Implications and opportunities
  • Digital technologies were applied extensively during COVID-19 outbreak
  • China’s government policies have been very supportive in the development of the digital economy
  • Blockchain technology should play a bigger role in building China's strength in cyberspace, developing the digital economy and advancing economic and social development
  • China’s companies, research institutes, as well as the government will keep investing on key technologies such as 5G mobile broadband, automation and robotics, artificial intelligence etc.
  • China‘s government will continue to support the following ten new sectors: Online education, Internet healthcare, Telecommuting, Digital governance, Industrial platforms, Digital transformation of enterprises, Virtual industrial parks and industrial clusters, Intelligent automation (e.g. unmanned distribution), Gig economy, Sharing economy

Contact us

Elton Yeung

Vice Chairman, PwC China

Tel: +[86] (10) 6533 8008

Thomas Leung

Managing Partner - Markets, PwC China

Tel: +[86] (10) 6533 2838 / +[852] 2289 8288

Elton Huang

China Tax Leader, Central China Markets Leader, Shanghai Office Lead Partner, PwC China

Tel: +[86] (21) 2323 3029

G. Bin Zhao

Senior Economist, PwC China

Tel: +[86] (21) 2323 3681

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