July industrial output, consumption, investment up; recovery concerns arise

China's economy has maintained the trend of recovery, but more efforts are needed to expand domestic demand, infrastructure spending and consumption, in order to shore up growth, officials and experts said on Monday.

They commented after China's industrial output, consumption and investment grew steadily in July, despite disruptions from renewed COVID-19 outbreaks and weakening demand.

Figures released by the National Bureau of Statistics showed value-added industrial output grew by 3.8 percent in July from a year earlier, and retail sales rose by 2.7 percent year-on-year in July.

Fixed-asset investment increased by 5.7 percent in the January-July period compared with a year earlier.

Fu Linghui, spokesman for the NBS, said that although China's economy faced pressures and challenges amid rising global stagflation risks, renewed domestic COVID-19 cases and extreme weather like heavy rains and high temperatures, the recovery continued in July, showcasing the resilience of the economy.

In July, the industrial output of China's equipment manufacturing and high-tech manufacturing expanded by 8.4 percent and 5.9 percent year-on-year, respectively, outdoing overall industrial output growth, NBS data showed.

According to the NBS, investment in high-tech industries jumped 20.2 percent year-on-year in the January-July period. And investment in infrastructure and manufacturing increased 7.4 percent and 9.9 percent year-on-year, respectively, in the first seven months.

Fu said China's economy will likely continue to rebound and the country will keep economic operations within a reasonable range upon better containment of the pandemic and strong policy support. A gradual recovery in consumption and industrial production can be expected.

In the next step, the government will make big efforts to expand effective demand, seek better use of local government special bonds in supporting the growth of investment in infrastructure and manufacturing, and further implement policies to spur consumption and ease burdens on enterprises, he said.

Experts lauded the government's recent stimulus measures for stabilizing growth, saying the continued recovery was mainly supported by the accelerated growth in infrastructure investment. But the foundation of that recovery is not solid amid weakening demand, they noted.

Zheng Houcheng, director of the Yingda Securities Research Institute, said infrastructure investment growth hit a four-month high in July, mainly fueled by the rise of investment in water conservation, environment and public facilities management.

Looking ahead, he said he expects to see strong policy support for infrastructure investment, which will play a key role in expanding domestic demand for the rest of the year.

The second half may hardly see rapid growth in infrastructure investment, and manufacturing investment will likely continue to face pressures amid slowing factory-gate inflation, Zheng's team said.

Against that backdrop, policy stimulus will play a crucial role in boosting growth in the second half, with a key focus on expanding domestic demand, Zheng said.

For their part, the authorities rolled out measures like boosting car sales to support retail sales; still, consumption is unlikely to pick up meaningfully amid COVID-19 outbreaks, weakening income expectations, and pressures on stabilizing employment, Zheng said.

Citing official data, Zhou Maohua, an analyst at China Everbright Bank, said while retail sales of goods slowed in July, consumption of catering services recovered steadily, indicating a steady rebound in consumer demand.

Zhou said consumption will continue to recover as the government has taken solid steps to control the pandemic, restore normal life patterns, stabilize employment and spur big-ticket items like cars and environmentally friendly home appliances.

Zhou said he expects to see the economy rebound steadily in the second half on the back of the government's effective measures to control the pandemic and policy stimulus moves taking effect.

He said more efforts should be made to increase support for weak links in the real economy, manufacturing, green development, infrastructure development and small and medium-sized enterprises.