Nation's economy shows renewed signs of recovery

A worker at an automated workshop in Huzhou, Zhejiang province, checks lithium battery products in a factory on Wednesday. The nation's economy showed signs of recovery in May, according to data from the National Bureau of Statistics. [Photo/XINHUA]

China's economy is gradually shaking off the impact of COVID-19 with improvements in a number of key major indicators, showing renewed signs of its gradual recovery, officials and economists said on Wednesday.

The economic recovery is likely to continue in June, they said, and the momentum is projected to be extended in the second half of 2022 with the help of stronger policy stimulus measures.

Fu Linghui, spokesman for the National Bureau of Statistics, said at a news conference in Beijing on Wednesday that China's economy has shown the momentum from this recovery.

Despite downward pressure from a complicated international environment and COVID-19 outbreaks, Fu said China's economy is likely to improve in June as the government puts a package of economic stimulus measures in place.

China's value-added industrial output rose by 0.7 percent year-on-year in May, compared with a 2.9 percent decline in April, data from the NBS showed on Wednesday.

Retail sales fell by 6.7 percent in May on a yearly basis, narrowing from an 11.1 percent decline in the previous month. Fixed-asset investment rose by 6.2 percent year-on-year in the January-May period, the bureau said.

Tommy Wu, lead economist at the Oxford Economics think tank, said that industrial production improved in May as COVID-19 outbreaks eased in most parts of China, adding that the recovery will become even more visible after growth stabilized in May.

He said that consumption remained weak as households remained cautious against COVID infections, with labor market weakness compounding the problem.

"Policy stimulus will play a crucial role in raising domestic demand in the second half. Still, it will be difficult for household consumption to recover strongly," he said. "We anticipate a recovery in the second half of this year as policy stimulus takes effect."

Experts said the gradual recovery of China's economy will also help bolster the global economy.

Zhou Mi, a senior researcher at the Chinese Academy of International Trade and Economic Cooperation in Beijing, said that China has been helping stabilize supplies of key products such as food, clothes and electric products for people around the world, including in the US.

"Such contributions by China to maintaining the stability of world industrial and supply chains are increasingly important to help curb inflation under current circumstances, especially as China is expected to play a bigger role in world trade," he said.

Citing China's relatively low inflation rate, Wang Yuanhong, deputy director of the Department of Economic Forecasting at the State Information Center, said that China has ample room to step up targeted monetary policy support to stabilize growth.

The NBS said China's producer price index, which gauges factory-gate prices, increased 6.4 percent year-on-year in May, marking the slowest rate of growth since March 2021.

China's consumer price index, the main gauge of inflation, rose 2.1 percent year-on-year in May, unchanged from the level in April.

Meanwhile, inflation in the United States hit a new 40-year high in May, as its CPI rose 8.6 percent year-on-year, data from the US Labor Department showed.

Looking at the second half of the year, Wang of the State Information Center estimated that China's CPI will rise slightly and the growth in PPI will slow, leaving room for flexible monetary policy in the coming months.

Wang called for more steps to stabilize supply and prices and ease the pressure on high costs for midstream and downstream companies, especially for small and medium-sized enterprises.

As the People's Bank of China, the nation's central bank, kept the medium-term lending facility rate on hold on Wednesday, Wu of Oxford Economics said that his team still expects another rate cut in the third quarter as broad-based monetary easing through rate reductions could be effective in boosting growth after the economy stabilizes.

"But we don't expect additional cuts as the policy divergence with the US and renminbi weakness will act as constraints," Wu added.