China to stay on the road to economic recovery, say analysts

SHANGHAI: China’s economy is maintaining a trend of recovery, but more efforts are needed to expand domestic demand, infrastructure spending and consumption, in order to shore up growth, officials and experts say.

They said that China’s industrial output, consumption and investment grew steadily in July, despite disruptions from renewed Covid-19 outbreaks and weakening demand.

Figures released by the National Bureau of Statistics (NBS) showed value-added industrial output grew by 3.8% in July from a year earlier, and retail sales rose by 2.7% year-onyear (y-o-y) in July.

Fixed-asset investment increased by 5.7% in the January to July period compared with a year earlier.

Fu Linghui, spokesman for the NBS, said that although China’s economy faced pressures and challenges amid rising global stagflation risks, renewed domestic Covid-19 cases and extreme weather like heavy rains and high temperatures, the recovery continued in July, showcasing the resilience of the economy.

NBS data showed that in July, the industrial output of China’s equipment manufacturing and high-tech manufacturing expanded by 8.4% and 5.9% y-o-y, respectively, outdoing overall industrial output growth.

According to the NBS, investment in hightech industries jumped 20.2% y-o-y in the

January to July period. And investment in infrastructure and manufacturing increased 7.4% and 9.9% y-o-y, respectively, in the first seven months.

Fu said China’s economy will likely continue to rebound and the country will keep economic operations within a reasonable range upon better containment of the pandemic and strong policy support.

A gradual recovery in consumption and industrial production can be expected.

In the next step, the government will make big efforts to expand effective demand, seek better use of local government special bonds to support the growth of investment in infrastructure and manufacturing, and further implement policies to spur consumption and ease burdens on enterprises, he said.

Experts lauded the government’s recent stimulus measures for stabilising growth, saying the continued recovery was mainly supported by the accelerated growth in infrastructure investment.

But the foundation of that recovery is not solid amid weakening demand, they noted.

Zheng Houcheng, director of the Yingda Securities Research Institute, said infrastructure investment growth hit a four-month high in July, mainly fuelled by the rise of investment in water conservation, the environment and public facilities management.

Looking ahead, he said he expects to see strong policy support for infrastructure investment, which will play a key role in expanding domestic demand for the rest of the year.

The second half may not see rapid growth in infrastructure investment and manufacturing investment will likely continue to face pressures amid slowing factory-gate inflation, said Zheng.

With that backdrop, policy stimulus will play a crucial role in boosting growth in the second half of this year, with a key focus on expanding domestic demand, he added.

For their part, the authorities rolled out measures like boosting car sales to support retail sales. Still, consumption is unlikely to pick up meaningfully amid Covid-19 outbreaks, weakening income expectations and pressures on stabilising employment, said Zheng.

Citing official data, Zhou Maohua, an analyst at China Everbright Bank, said while retail sales of goods slowed in July, consumption of catering services recovered steadily, indicating a steady rebound in consumer demand.

Zhou said consumption will continue to recover as the government has taken solid steps to control the pandemic, restore normal life patterns, stabilise employment and spur big-ticket items like cars and environmentally friendly home appliances.

Zhou added that he expects to see the economy rebound steadily in the second half on the back of the government’s measures to control the pandemic and policy stimulus moves taking effect.

He said more efforts should be made to increase support for weak links in the real economy, manufacturing, green development, infrastructure development, and small and medium-sized enterprises. — China Daily/ann

“Consumption will continue to grow as the government has taken solid steps to control the pandemic and restore normal life patterns.” Zhou Maohua