(Yicai Global) July 16 -- China’s gross domestic product grew 3.2 percent in the second quarter as the world’s second-largest economy shows strong signs of a V-shaped rebound after the ravages of the novel coronavirus outbreak. However, the government warned that the pandemic is still at large and the country’s economic recovery remains under pressure.

First-half GDP shrank 1.6 percent to CNY45.7 trillion (USD6.5 trillion), according to data released by the National Bureau of Statistics of China today.

While the Chinese economy managed to gradually overcome the adverse effects of the Covid-19 outbreak in the first half, it should also be noted that some indicators are still declining, said NBS spokesperson Liu Aihua. The pandemic is still spreading. Its huge impact on the world economy will continue. External risks will greatly increase, he added.

The Chinese economy is likely to take a deep V-shaped course due to the impact of Covid-19, said Huang Qunhui, director of the Economic Research Institute at the Chinese Academy of Social Sciences. After a sharp decline in the first quarter, it turns positive in the second quarter. This should be followed by normalized growth in the second half and medium to high-speed growth in the first half of 2021, he added.

The reason for the rapid and steady recovery in the first half was due to China's timely introduction of a series of related policies, especially those that were clearly defined by the National People's Congress in May, Zhang Liqun, a researcher at the Macroeconomic Research Department of the Development Research Center of the State Council, told Yicai Global. All policies have played an important and positive role in promoting the overall economic recovery, he added.

Key Indicators

Recently released key economic indicators have shown steady improvement. The China Manufacturing Purchasing Managers' Index, an indicator of economic activity in the country’s manufacturing sector, has stayed above 50, indicating expansion, for four straight months. Ports’ cargo throughput has risen for three consecutive months. National electricity consumption increased by 6.1 percent in June. Crude steel output, excavator sales and express delivery volumes, all major economic barometers, continued to improve.

The total retail sales of consumer goods reached CNY17.2 trillion (USD2.5 billion) in the first half, a drop of 11.4 percent from the year before. Retail sales of consumer goods in the second quarter fell 3.9 percent year on year.

Fixed asset investment in the first half fell 3.1 percent from the same period last year to CNY28.16 trillion.

Value-added industrial output, which measures the activity of designated large enterprises with annual turnover of at least CNY20 million (USD2.8 million), fell by 1.3 percent in the first half year-on-year. However, it was up 4.4 percent from the previous year in the second quarter.

Supply, Demand Balance

However, the recovery in demand is lagging behind, said Zhang. If consumption does not improve, many companies will face difficulties including capital shortfalls, he added.

Investment and consumer demand are expected to pick up in the second half due to the implementation of comprehensive macro-policies, the accelerated release of new reform dividends and the boosting of market confidence, Liu Xiaoguang, researcher at the National Development and Strategy Research Institute of the People’s University of China, told Yicai Global.

Authorities should also shift their focus from government-led bailout and survival support programs to promoting the balance between supply and demand and restoring the market cycle, Liu added.

Editor: Kim Taylor