People shop at a food exhibition in Dalian, Northeast China's Liaoning Province on May 7, 2023. The country is sparing no effort to increase consumption, as official data showed that retail sales went up 5.8 percent year-on-year in the first quarter of this year. Photo: VCG

China's economy continued expanding in May, with the output of industrial enterprises above the designated size up by 5.6 percent year-on-year, while retail sales rose by 3.7 percent, data from the National Bureau of Statistics (NBS) showed on Monday.

Observers said the data showed that the world's second-largest economy sustained the recovery momentum from the first quarter and is on a firm trajectory to hit the goal of 5 percent GDP growth in 2024, despite multiple pressures including the "decoupling" attempt of the US and the domestic real estate market's downturn. 

Internal and external conditions underpinning growth could "turn better" in the second half, observers said. Investors are also keenly awaiting clues from the upcoming third plenary session of the 20th Communist Party of China (CPC) Central Committee in July, to see how policymakers would press ahead with comprehensively deepening reform and further shoring up the vitality of the real economy. 

The output of industrial enterprises above the designated size rose by 6.2 percent year-on-year in the January-May period, in spite of the crackdown by the US targeting China's advantageous industries.

 "For an economy as large as China's, any industrial production growth rate above 5.5 percent is quite high and hard-won, particularly taking account of the recent reckless US crackdown against China's new-energy industries. 

"The factory data in May sent a very encouraging signal for the first-half economic performance," Tian Yun, a veteran economist based in Beijing, told the Global Times on Monday.

Output of new-energy vehicles jumped by 33.6 percent in May, while chip production grew by 17.3 percent, NBS data showed.

Li Chang'an, a professor at the Academy of China Open Economy Studies of the University of International Business and Economics, told the Global Times on Monday that the expansion also reflected the fast-lane development of China's new quality productive forces, which are set to play a bigger role in the economy in the second half.

Retail sales grew 3.7 percent in May, up from 2.3 percent in April. Observers said the rise reflected the combined effects of holiday consumption and the gradual recovery of a vibrant consumer market, supported by the government's policy stimulus.

In the first five months, retail sales increased 4.1 percent year-on-year.

During the first five months, fixed-asset investment rose 4 percent year-on-year, compared with 4.2 percent in the first four months, largely due to the continuous sluggishness in the property sector.

However, NBS spokesperson Liu Aihua told reporters on Monday that there were "some positive changes" in the real estate market after departments and localities further adjusted and optimized policies starting in mid-May.

"If the economic rebound in June sustains the pace of May, then it is highly likely that GDP growth in the first half could exceed 5 percent," Tian said.

China's GDP grew 5.3 percent year-on-year in the first quarter. Observers stressed that as global liquidity is expected to ease, and the property sector's adjustment may stabilize, economic growth in the second half could further "take a leap forward." 

The third plenary session of the 20th CPC Central Committee will be held in Beijing in July, the Xinhua News Agency reported, with more pro-growth stimulus measures expected to be announced.

According to the agenda of the session, the Political Bureau will report its work to the CPC Central Committee, and the session will primarily study issues concerning further comprehensively deepening reform and advancing Chinese modernization.

The meeting could draw up a new blueprint for China's medium- to long-term economic development, and deepening reform in all aspects of the economy will be given a more prominent position, analysts said. "It will stimulate society's enthusiasm for bold reforms and give another considerable boost to the real economy," Li said. 

"The tone-setting meeting will be held as the international situation undergoes drastic change. Externally, the US presidential election in November may further complicate the external environment," Tian said. 

It is important that Chinese policymakers maintain a strategic focus and adopt a more flexible approach in balancing the internal and external situations, he said.

A number of international organizations have voiced confidence in the prospects of the Chinese economy in recent days. 

In late May, the IMF raised its forecast for China's GDP growth to 5 percent in 2024 and 4.5 percent in 2025, citing strong first-quarter GDP data and policy measures. 

The World Bank in June raised its 2024 economic growth forecast from 4.5 percent to 4.8 percent.