China saw forecast-beating economic growth in the second quarter after a record contraction in the previous three months, as businesses cautiously returned to normality after strict lockdowns across the country.
The figures released Thursday follow a string of data showing the world’s number two economy slowly emerging from the outbreak, and should provide hope to other governments looking to get back on track from a crisis that has likely caused a global recession.
Gross domestic product expanded 3.2 per cent in April-June, the National Bureau of Statistics said, smashing expectations and a massive improvement on the 6.8 per cent contraction in the first quarter.
However, in a sign that the recovery could take some time, retail sales — a key indication of consumer sentiment in the world’s second-largest economy — fell short of expectations, shrinking 1.8 per cent on-year in June.
The weak showing suggests people remain reticent about going out to spend, even as the virus appears to be brought largely under control.
“No matter how much stimulus and fiscal sugar you try to entice consumers with, they will not leave their apartment and go on a spending spree until they feel confident the landscape is virus-free,” said AxiCorp strategist Stephen Innes.
The retail sector has taken on an increasingly crucial role in China’s economy as leaders look for consumers, rather than trade and investment, to drive growth.
There is an even greater need for a pick-up in domestic consumption as China’s external demand weakens, but Innes noted it is easier to normalise supply than demand.
Louis Kuijs of Oxford Economics added that household consumption remains the “weakest link” among indicators, although China’s economic upturn is expected to continue in the second half of 2020.
Economists warn of high uncertainty ahead owing to an uneven recovery — growth in infrastructure investment has rebounded, but private fixed-asset investment and retail sales remain weak.
The coronavirus, which first emerged in the city of Wuhan late last year, has since shut businesses and destroyed hundreds and millions of jobs globally, likely tipping the world economy into recession.
ALSO READ: China committed to arms control talks — US
The growth reading, while smashing the 1.3 per cent growth tipped in an AFP poll of analysts, is still among the lowest rates on record on a quarterly basis.
The economy contracted 1.6 per cent on-year in the first six months, the NBS said, while the urban unemployment rate dipped to 5.7 per cent in June, from 5.9 per cent a month earlier.
Unemployment is a closely watched marker, with nearly nine million graduates expected to enter an uncertain labour market this year and analysts pointing out that the actual jobless rate is likely higher.
Tommy Wu, economist at Oxford Economics, noted in a recent report that the “survey-based unemployment rate substantially understates labour market stress as the measure excludes large numbers of unemployed (would-be) migrants”.
Industrial production grew 4.8 per cent in June, in line with expectations and up from 4.4 per cent in May.
On Thursday, NBS spokeswoman Liu Aihua told a news conference that China’s economy “demonstrated a momentum of restorative growth and gradual recovery”.
But with the coronavirus pandemic still ravaging many of China’s key trading partners, national economic recovery was “still under pressure”.
Some expect China to be the only major economy to see growth in 2020 as it was the first to be hit by the virus and to subsequently bounce back.
Economists warn, however, that official Chinese economic figures should be taken with a grain of salt, with longstanding suspicions that data is massaged for political reasons by a ruling Communist Party that has based its legitimacy on delivering continued prosperity.