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China’s economy bounces back after pandemic contraction

This article is more than 12 months old

BEIJING China's economy returned to growth in the second quarter, following a coronavirus contraction, with President Xi Jinping promising continued expansion and urging foreign companies to be a part of it.

The forecast-beating figures released yesterday follow a string of data showing the world's No 2 economy slowly emerging from the pandemic, and should provide hope to other governments looking to recover from a crisis that has likely caused a global recession.

Gross domestic product expanded 3.2 per cent in April-June, the National Bureau of Statistics (NBS) said, smashing expectations and a massive improvement on the 6.8 per cent contraction in the first quarter.

In a letter to members of the Global CEO Council, Mr Xi said "the fundamentals of China's long-term economic growth have not changed and will not change", according to state media.

He reiterated repeated pledges to continue opening up an economy that many foreign businesses say offers unfair advantages to Chinese companies, and added that it was "the right choice to stay rooted in China".

But in a sign that full recovery could take time, retail sales - a key indication of consumer sentiment - fell short of forecasts, shrinking 1.8 per cent on-year last month, suggesting continued reluctance to go out and spend even as the virus appears largely under control in China.

"No matter how much stimulus and fiscal sugar you try to entice consumers with, they will not leave their apartment and go on a spending spree until they feel confident the landscape is virus-free," said AxiCorp strategist Stephen Innes.

The retail sector occupies an increasingly crucial role in China's economy as leaders look to consumers, rather than trade and investment, to drive growth.

The economy contracted 1.6 per cent on-year in the first six months, the NBS said, and urban unemployment dipped to 5.7 per cent last month from 5.9 per cent a month earlier.

Industrial production grew 4.8 per cent last month, in line with expectations and up from 4.4 percent in May. - AFP