A child buys snacks at a night fair in Xuan'en County of Enshi Tujia and Miao Autonomous Prefecture, central China's Hubei Province, Aug. 18, 2023. A series of activities have been held to boost the nighttime economy in the scenic area of Xuan'en County including sightseeing trips on the Gongshui River and night fairs along the river. (Xinhua/Cheng Min)

China on Friday posted better-than-expected economic data in August, as the world's second-largest economy continues to recover, after policymakers took a series of vigorous but targeted measures to tackle challenges and downward pressure.

The strong data showed that the Chinese economy may have passed the worst phase in the recovery process and reached a turning point, and offered further proof that the "China collapse" claim hyped by Western officials and media is absurd, analysts said. 

Better-than-expected growth in industrial output and retail sales, among others, also gave renewed confidence that the Chinese economy is well on track to meet its annual growth target, analysts said. But supportive policies still need to be effectively implemented to shore up the economy, which faces a complex international situation and sluggish global demand, they noted.

China's value-added industrial output increased by 4.5 percent year-on-year in August, higher than a reading of 3.7 percent in July, and retail sales grew by 4.6 percent, accelerating from July's 2.5-percent growth, according to data released by the National Bureau of Statistics (NBS) on Friday. Both sets of data showed quickened pace of growth from that seen in the June-July period.

The data beat the predictions from a Reuters poll of economists, which forecast a 3.9-percent growth for industrial output and a 3-percent growth for retail sales. They were also higher than forecasts made by Chinese financial news site Yicai, which forecast a 4.03-percent growth for industrial output and a 3.95-percent growth for retail sales.

The solid performance was backed up by strong consumption growth during the summer holidays, which boosted the services industry, including tourism and catering, to high growth and to near pre-pandemic levels. Brisk automobile sales in the month also helped.

"In August, major indicators improved marginally, the Chinese economy recovered, high-quality development steadily advanced, and positive factors accumulated," Fu Linghui, an NBS spokesperson, told a press conference on Friday following the release of the economic data. 

NBS data also showed that China's surveyed urban unemployment rate dropped by 0.1 percentage point from July to 5.2 percent in August.

A worker makes elevator parts that will be sent overseas in a factory in Nanxun district of Huzhou, East China's Zhejiang Province on July 18, 2023. Photo: VCG

Confidence instilled
"Despite a complex international situation, China's economy has shown strong resilience and vast potential, the endogenous growth momentum of the Chinese economy has gradually increased, and along with the implementation of a raft of supportive policies, the economy is expected to continue its recovering trend," Fu said.

However, Fu noted that external factors, including sluggish global demand and rising unilateralism and protectionism, and internal factors such as insufficient domestic demand and operational difficulties faced by domestic enterprises are still weighing down on the recovery process. "The foundation for economic recovery still needs to be consolidated," he said. 

Zhou Maohua, an economist at Everbright Bank, told the Global Times on Friday that the economic indicators exceeded expectations in an all-round manner in August, reflecting that the momentum has improved significantly.

Faster growth in industrial output and retail sales, rising investment in manufacturing, and narrowing decline of real estate investment brightened the data set published on Friday, Zhou said. 

 "Domestic production and social life has continued to return to normal in August, macro-policy effects are showing, and the pace of domestic demand recovery has accelerated again after slowing down in recent months," Zhou said. "Considering economic data and trends in July and August, GDP growth in the third quarter is expected to reach 5 percent or even higher."

Consumption, investment and industrial output showed slow momentum in recent months, but the endogenous growth momentum is showing signs of a reversal in the month, Zhou said.

The better-than-expected data came after China issued a barrage of supportive policies to stabilize the economy amid downward pressure. In late July, Chinese policymakers issued 20 measures to boost domestic consumption, including support for expanding real estate and auto sales. A total of 24 measures were also released in August to boost foreign investment. 

On Thursday, the People's Bank of China, the central bank, announced that it would cut the reserve requirement ratio by 25 basis points effective Friday, injecting more than 500 billion yuan ($68.7 billion) in medium- and long-term liquidity into the economy.

Zhou said the lowering of RRR, which landed earlier than the market expected, showed policymakers' intention to front-load supportive policies to foster recovery and ramp up market confidence. 

As the targeted and sustainable measure was announced before China's National Day holidays, a "golden week" of consumption, it stands to further boost market confidence, Zhou said.

Cao Heping, an economist at Peking University, told the Global Times on Friday that easing China-US tensions, more policy support and favorable seasonal factors will help the economy to gain pace in the third quarter, allowing it to grow at a faster pace than in the first half.

Cao predicted that third quarter GDP will reach a 5.8 percent annual growth rate and the fourth quarter may see 6-percent growth in GDP.

The continued recovery of the six industries such as tourism and civil aviation, both hit hard by the pandemic, will continue to boost confidence for market entities in the remaining months of the year, Cao said.

Li Changan, a professor at the Academy of China Open Economy Studies of the University of International Business and Economics, said that the data also showed once again that claims of "China entering a recession" or "China facing deflation" are groundless.

Nevertheless, Li noted that continued efforts are needed to further stabilize expectations and improve the business environment.

Highlighting the lingering challenges, fixed-asset investment in the first eight months posted a growth of 3.2 percent, down from 3.4 percent in January-July period. The fixed asset investment reading was lower than projections from both polls by Reuters and Yicai.

"If various supportive policies can converge, and further drive growth in the three economic drivers - investment, exports and consumption - the Chinese economy will definitely reach targeted growth of around 5 percent for the year," Li said.

A ro-ro ship docks at a pier in Lianyungang port, East China's Jiangsu Province, to load vehicles headed to overseas markets on August 23, 2023. From January to July this year, the port exported a total of 195,000 vehicles, up 89.1 percent year-on-year. Photo: VCG

Contribution to the world

With its sustainable growth, constantly strengthening new growth engines and continually recovering confidence, the Chinese economy will continue to be the global economy's growth driver, despite the ill-intentioned hype by some Western media, Chinese analysts noted.

China's economic performance will continue to be impressive, compared with those of several major Western economies, they said.

China's growth in the second quarter, at 6.3 percent, far exceeded that of the EU, which saw growth at 0.5 percent and the US' 2.4 percent, public data showed.

The Chinese economy will contribute to a third of global growth this year, according to the IMF, predicting a 5.2-percent-growth for China in 2023.

As China continues to open to the world, with a slew of mega events and trade shows in the last two quarters of the year, it will bring more dividends to partner countries, analysts said.

The 20th China-ASEAN Expo is set to kick off in Nanning, South China's Guangxi Zhuang Autonomous Region, from Saturday to Tuesday, fostering ties between China and ASEAN, its largest trading partner.

In addition, Beijing will hold the third Belt and Road Forum for International Cooperation in October and the China International Supply Chain Expo in December. Shanghai will hold the sixth China International Import Expo in November. Such events will continue to strengthen China's ties with the world and bolster China's role as a global economic driver, bringing more developmental dividends to the global community, experts said.