(Yicai Global) July 15 -- China’s economy, the world’s second largest, will continue to maintain steady growth in the second half of this year, despite a number of negative factors, according to economists.

Gross domestic product rose 7.9 percent in the second quarter from a year earlier, while the rate was 12.7 percent for the first six months, according to data the National Bureau of Statistics released today.

The recovery will go on in the second half despite big disruptions and drags, especially Covid-19 outbreaks and rising global commodity prices, which have slowed the shift to consumption and manufacturing investment as economic drivers from exports and real estate, Luo Zhiheng, deputy director at the research institute of Yuekai Securities, told Yicai Global.

China’s economic structure improved in the first half, with the growth drivers switching, Luo said. The industrial structure is also continuously improving, with contribution mainly made by high value-added industries and new growth drivers, while exports keep on surging as the impetus switches from developed countries to emerging economies, he said.

According to the NBS data for the first half, the value-added of industrial firms above a designated size rose 15.9 percent, retail sales of consumer goods jumped 23 percent to CNY21.19 trillion (USD3.28 trillion), and fixed asset investment gained 12.6 percent to CNY25.6 trillion.

The service sector has recovered relatively quickly, but has not yet returned to normal, and manufacturing investment and consumption remain weak in recovery, said Zhu Baoliang, chief economist at the State Information Center’s economic forecasting department.

Covid Control

Thanks to China taking the lead in bringing Covid-19 under control, industry has fully revived and even exceeded pre-pandemic levels, Zhu said, adding that industrial capacity utilization is at a record high and demand is recovering at a faster pace.

A full recovery of the service sector and employment in the second half depends on whether the current epidemic prevention model can be fortified by the vaccination campaign, according to Xing Ziqiang, Morgan Stanley's China chief economist.

But infrastructure investment is expected to rebound moderately as fiscal policy is fine-tuned, and manufacturing investment will gain further momentum, especially considering that the cost pressure on mid- and downstream businesses may be relieved at the margin, Xing said.

On the whole, China’s economy recovered steadily in the first half, showing positive momentum. But it should be noted that the global pandemic is evolving constantly, and there are many external uncertainties. Efforts are still needed to consolidate the foundation for stable recovery and development as the domestic economy faces an uneven recovery, NBS spokesperson Liu Aihua said at a press conference today.

International bodies recently raised their projections for China’s GDP this year. The World Bank lifted its forecast to 8.5 percent from 8.1 percent, while the International Monetary Fund increased it to 8.4 percent from 8.2 percent.

Editor: Tom Litting