China's economic recovery consolidates, but uncertainties remain

China's economic activities remain on the track to recovery as the latest data revealed an accelerated resumption across the board, but the economy still faces challenges from the global spread of the novel coronavirus, analysts said.

Aerial photo taken on June 21, 2018 shows morning view of the Lujiazui area in Pudong of Shanghai, east China. [Photo/Xinhua]

Factory activities continued to pick up in May with the value-added industrial output, an important economic indicator, going up 4.4 percent year on year, data from the National Bureau of Statistics (NBS) showed Monday.

Other key economic indicators also showed signs of a rebound on the back of supporting policies to coordinate growth and the control of the COVID-19 epidemic.

In the first five months, fixed-asset investment declined 6.3 percent year on year to 19.92 trillion yuan (about US$2.81 trillion), narrowing by 4 percentage points from the decrease in the first four months.

China's retail sales of consumer goods, a major indicator of consumption growth, declined 2.8 percent year on year in May, rebounding from a drop of 7.5 percent in April.

Despite a broader consumption downturn, online sales continued to be active as consumers turned to online services when staying indoors, with an increase of 4.5 percent year on year in the first five months, quickening by 2.8 percentage points from the first four months, the data showed.

Commenting on the data, Wen Bin, chief analyst at China Minsheng Bank, said China's economy continued to ride the wave of recovery last month with improved demand for production, but a few indices were still lower than the same period last year.

It indicates that the economy has not yet returned to the normal level, NBS spokesperson Fu Linghui said, citing risks from the ongoing global pandemic.

As the COVID-19 pandemic wreaks havoc on the global economy, the United Nations Conference on Trade and Development anticipated a 26.9-percent drop in global commodity trade in Q2 compared with Q1.

Facing rising uncertainties from home and abroad, "the full normalization of China's economy entails greater efforts," said Fu.

China will blaze a new path of shock-resilience and positive growth cycles which will center on stabilizing employment, energizing the market, stimulating demand and achieving stable growth, according to a government work report delivered by Premier Li Keqiang at the annual national legislative session.

The country will pursue more proactive and impactful fiscal policy, including issuing 1 trillion yuan of government bonds for COVID-19 control to release more funds for companies and individuals and further reducing the corporate tax and fee burden by over 2.5 trillion yuan.

On the monetary front, China will use a variety of tools including reserve requirement ratio cuts, interest rate reductions and re-lending to support the real economy, said the report.

Going forward, the stronger macro policies and thriving new growth drivers such as the digital economy will shore up the continued recovery of the Chinese economy, according to Fu.

Monday's data also showed China's job market remained generally stable in May, with the surveyed unemployment rate in urban areas standing at 5.9 percent, down 0.1 percentage points from the previous month.