Rebound strong in 2nd quarter

China's economy rebounded substantially in the second quarter, with stronger-than-expected GDP growth of 3.2 percent from a year earlier. Economists said such recovery momentum is likely to be sustained in the coming quarters, as policies are expected to remain supportive and flexible.

The country has become the world's first major economy to show robust recovery from the damage caused by the COVID-19 pandemic, as the economy returned to growth from a sharp contraction of 6.8 percent in the first quarter.

Key economic indicators have shown continuous improvement. The country's industrial production is recovering quickly, growing 4.4 percent year-on-year in the second quarter, contrasting with an 8.4 percent decline in the first quarter, according to data released on Thursday by China's National Bureau of Statistics.

China will keep deepening reform and expanding opening-up and provide a better business environment for the investment and business development of Chinese and foreign enterprises, President Xi Jinping said in a reply letter to representatives of Global CEO Council members.

In the letter dated on Wednesday, Xi assured the global CEOs that China will foster new opportunities and create new prospects for Chinese and foreign enterprises. He said those CEOs have made the right choice in staying rooted in China.

Saying the interests of all countries are highly integrated in today's world, and humanity is a community with a shared future that shares weal and woe, Xi said win-win cooperation conforms to the trend of the times.

China unswervingly commits itself to pursuing the path of peaceful development, making economic globalization more open, inclusive, balanced and beneficial to all, and promoting the building of an open world economy, the president said.

Xi expressed hope that the CEOs will adhere to the principle of win-win cooperation and common development, strengthen exchanges and cooperation with Chinese companies, and contribute to global economic recovery.

Speaking about China's economy amid the COVID-19 pandemic, Xi said the fundamentals of China's long-term sound economic growth remain unchanged and will not change.

China is coordinating efforts in dealing with the COVID-19 epidemic and socioeconomic development, and striving for a decisive victory in building a moderately prosperous society in all respects and eradicating poverty, he said.

To this end, Xi said, China will comprehensively implement major policies and measures aimed at ensuring the six priorities of employment, people's livelihoods, development of market entities, food and energy security, stable operation of industrial and supply chains, and smooth functioning at the community level.

It is also making efforts to ensure stability in the six areas of employment, finance, foreign trade, foreign investment, domestic investment and market expectations, he added.

Eighteen CEOs of the Global CEO Council, which groups 39 multinational companies that are global leaders in their respective industries, wrote to Xi recently, offering suggestions on China's economic development and international cooperation in the post-pandemic era.

In their letter to Xi, the CEOs spoke highly of China's efforts to successfully contain the novel coronavirus epidemic under Xi's strong leadership and take the lead in resuming work and production, as well as its positive role in supporting the global COVID-19 fight and maintaining world economic stability.

They said Xi's proposition on creating new opportunities out of crises and opening up new prospects in changing circumstances, as well as his resolve to unswervingly promote economic globalization, have further boosted their confidence in China and their commitment to staying rooted in China.

The Global CEO Council was founded in 2013. The initial CEO Council was formed by the CEOs of 14 multinational companies.

Meanwhile, China's service sector expanded by 1.9 percent in the second quarter, reversing the decline of 5.2 percent in the first three months. Both investment and consumption are rebounding, as the decline of fixed-asset investment narrowed to 3.1 percent in the first half of the year, while the contraction of retail sales narrowed to 3.9 percent in the second quarter from the steep decline of 19 percent in the previous quarter, according to the NBS.

"Generally speaking, the economy overcame the adverse impact of the COVID-19 pandemic gradually in the first half of the year and demonstrated a momentum of restorative growth with greater resilience and vitality," Liu Aihua, an NBS spokeswoman, said at a news conference in Beijing.

Economists said China's strong economic rebound was helped by factors including the country's effective measures to bring the pandemic under control, strong policy support for business resumption and investment, and better-than-expected export recovery as a result of the country's fast production resumption.

"While the global pandemic situation continues to deteriorate, China's economy has managed to recover quickly, with the GDP growth rebounding to above 2 percent, which is a remarkable achievement," said Lu Ting, chief China economist at Nomura Securities.

Lu said China's fast production resumption has helped the country's exports to recover and its employment to stabilize. In addition, timely and effective policies to spur infrastructure investment have helped to drive up domestic demand.

Economists with US bank Goldman Sachs said in a research note that China's economic performance in the second quarter was well above market expectations, thanks to much less drag on the economy from the virus and the government's strong and supportive policy stance.

Looking ahead, more policies to boost consumption and domestic demand are expected to come into place, as the country's recovery has shown some uneven signs. Supply is recovering faster than demand, while investment appears to be rebounding more strongly than consumption, economists said.

Despite the recent steady recovery, the country's retail sales growth remains in negative territory, declining 1.8 percent year-on-year in June as the COVID-19 pandemic continues to restrain consumer spending in catering and other sectors that require physical contact.

Cheng Shi, chief economist of ICBC International, said the focus of China's economic recovery will likely shift from investment to consumption, and the marginal improvement of consumption will likely accelerate in the second half of the year. He forecast that the growth rate of China's retail sales will turn positive in the third quarter.

A recent survey by the People's Bank of China showed that the proportion of residents who have plans to increase expenditures in housing, tourism and expensive goods in the next three months is rising, showing an improving spending appetite of domestic consumers.

Economists expect China's monetary policy to gradually return to normal in the second half of the year, while the overall policy stance will remain supportive and flexible, since the country is still facing uncertainties from overseas markets, and policymakers are still gauging the impact on economic recovery of severe floods in southern parts of the country.

Nonetheless, Cheng said the Chinese economy has shown strong resilience, which will likely make yuan-denominated assets a scarce resource in the global market and may push asset prices higher and draw more international capital into the Chinese market.