(Bloomberg) -- China's economic recovery will continue to be held back by weak consumption, as the lower-income part of the population are still seeing falling wages and persistent virus outbreaks keep consumers at home, according to China International Capital Corp.
The Covid-19 crisis has had a bigger impact on people at the lower end of the country's income ladder, including migrant workers and those working in the sectors hit the hardest by the outbreak, such as catering and retail sales, CICC economists led by Liu Liu wrote in a note. Migrant workers' monthly wages contracted by 6.7% in the second quarter, even though disposable income growth nationwide recovered to 4.5% in the period, according to Bloomberg calculations using official data.
That means income distribution in China has worsened even though the economy posted a notable rebound in the second quarter. In addition, rising global virus cases and regional outbreaks at home will also impact the trajectory of the recovery in consumption, Liu said. For instance, Beijing has seen its off-line retail sales contracting at 26.8% in June, deeper than a month earlier, as the city issued stricter social distancing measures in response to a second-wave of outbreak, he said.
“We expect macro policy support to come to stabilize jobs and people's livelihood as the pace of economic recovery weakens in the second half,” Liu said.
©2020 Bloomberg L.P.
With assistance from Bloomberg
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