As China’s economic recovery from the coronavirus gains momentum, what is the outlook?

Sales of excavators and heavy trucks used in construction soared in August, with car sales, electricity generation and rail freight also rising from a year earlier

A growing number of financial institutions have revised up their forecasts for China’s gross domestic product growth rate

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China was the first major economy to return to growth following the damage caused by the coronavirus, growing 3.2 per cent in the second quarter compared to a year earlier after a record 6.8 per cent contraction in the first quarter. Photo: Reuters

Published: 11:30pm, 11 Sep 2020Updated: 3:46am, 12 Sep 2020

From soaring sales of construction vehicles to strong increases in rail freight volume, and from record daily electricity generation and consumption figures to a rebound in car sales, a flurry of indicators provide further evidence that China’s economic rebound is gaining momentum.

And in response, multiple banks, investment firms and rating agencies are revising up their forecasts for China’s economic growth for this year, after a series of economic data beat expectations in the first two months of the third quarter.

China was the first major economy to return to growth following the damage caused by the coronavirus, growing 3.2 per cent in the second quarter compared to a year earlier after a record 6.8 per cent contraction in the first quarter. In stark contrast, other major economies, including those of the United States, Europe, Japan, Australia and India, endured deep contractions in the second quarter and are still struggling to overcome the effects of the pandemic.

But economists have warned that the Chinese economy is simply completing the easiest part of its comeback, and that the unbalanced growth pattern – with industrial production and construction activity strong but consumer spending remaining weak – could linger into next year, meaning it is time for the government to pay more attention to long-term structural risks and challenges.

China’s recovery is undoubtedly impressive, especially when compared to other major economies that are mired in the pandemic

Lu Ting

On Tuesday, the National Bureau of Statistics is due to release three further major measures of economic activity – industrial production and retail sales data for August and fixed asset investment data for the first eight months of the year – giving further clues about the nation’s growth in the third quarter.

Industrial output is expected to grow 5.2 per cent in August from a year earlier, accelerating from 4.8 per cent in July, according to the median forecast of a Bloomberg survey of economists.

Retail sales are expected to improve to a flat reading in August compared to a year earlier, after having fallen in each of the previous six months.