At the beginning of the year, China’s economy was grappling with the double-whammy of the coronavirus pandemic and heightened tensions with the United States over trade and commerce, technology and geopolitics. China’s $14-trillion economy contracted 6.8% in the first quarter, its worst downturn in a quarter since it started publishing GDP figures in 1992.
Yet, China’s economy started to recover in late March after the ruling Communist Party declared that the disease was under control. And the Asian giant became the first economy to grow since the coronavirus pandemic, recording a strong 3.2% year-over-year expansion in the second quarter after lockdown measures were eased, and factories and stores were reopened.
It also meant that the world’s second-largest economy averted recession, thanks to the draconian measures the government had imposed to put an end to the spread of the virus and the stimulus implemented to prevent economic calamity.
But even though the magnitude of recovery was much stronger than many analysts anticipated, the recovery has been a bit uneven. Manufacturing, no doubt, was a bright spot with industrial production rising 4.8% in June compared to the year-ago period and also notching the third straight month of growth. Industrial output had jumped 4.4% in May.
At the same time, real estate investments improved 8.5% in June banking on credit boost provided by the government. In fact, for the first half of the year, fixed asset investment declined less than expected, or only 3.1% from the same period in 2019.
Notably, June exports rather pleasantly improved 0.4%, while imports increased 3% including a 10.6% jump in purchase of U.S. commodities despite the tariff tussle. But what affected the economy was consumers’ unwillingness to spend amid pay cuts and job losses. And the weakness in retail sales did suggest that it was tough for Beijing to convince people to spend despite the government taking necessary steps to drive consumption. Lest we forget, the government provided cash to prospective car buyers, and billions of dollars in coupons to encourage customers to avail goods and services, including smartphones and tourist activities.
Compared to the prior year, retail sales dropped 1.8% in June. It was the fifth straight month of decline, in contrast to the predicted growth rate of 0.3%. However, not all is gloomy! There was certainly a marked improvement in retail sales. After all, retail sales had shrunk a whopping 19% in the previous quarter. What’s more, online retail sales in June rose 14.3% versus previous quarter’s rise of 5.8%. As more people were confined to their homes and shopping malls were closed, online sales naturally picked up.
Last but not the least, the International Monetary Fund (“IMF”) continues to expect China’s economy to grow 1% this year. That would undoubtedly be weak growth but much better compared to the IMF’s outlook of a 4.9% decline in global economic growth.
5 Hot China Stocks to Invest In
With China becoming the first major economy to register growth since the start of the coronavirus pandemic and with more room to expand in the near future, investing in solid China stocks seems wise at the moment. These stocks flaunt a Zacks Rank #1 (Strong Buy) or 2 (Buy).
SOHU Quick Quote SOHU - Free Report
) is a leading provider of online advertising, search, media and gaming services in China. It is well-poised to benefit from the growth potential of the China online gaming market. Per ResearchAndMarkets, the China gaming market is expected to see a CAGR of 14% from 2019 to 2024.
Additionally, Sohu’s investment in online videos is expected to boost the top line. Improved content availability on media portal platform as a result of partnerships with quality content providers is a major upside.
Sohu.com currently has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings has risen 48.9% over the past 60 days. The company’s expected earnings growth rate for the current quarter is 103.6%.
Noah Holdings Ltd.
NOAH Quick Quote NOAH - Free Report
) is engaged in providing independent services, primarily comprising distribution of wealth management products to the high net worth population in China.
Noah currently has a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings has risen 10.1% over the past 60 days. The company’s expected earnings growth rate for the next year is 25.5%.
58.com Inc. operates online marketplace serving local merchants and consumers in China. It offers housing rental, recruitment, second-hand product, travel, catering, entertainment, and group-buying information.
58.com currently has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings has risen 76.1% over the past 60 days. The company’s expected earnings growth rate for the next five-year period is 20.8%. You can see
the complete list of today’s Zacks #1 Rank stocks here.
DouYu International Holdings Limited
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) operates a platform on PC and mobile apps that provides interactive games and entertainment live streaming in China.
DouYu currently has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings has risen 34.2% over the past 60 days. The company’s expected earnings growth rate for the current year is 200%.
China Automotive Systems, Inc
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) manufactures and sells automotive systems and components in the People's Republic of China. The company produces rack and pinion power steering gears for cars and light duty vehicles.
China Automotive Systems currently has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings has risen 10% over the past 60 days. The company’s expected earnings growth rate for the next year is 272.7%.
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