Despite strong Q2 data, more needs to be done to secure growth

That GDP grew 3.2 percent year-on-year in the second quarter of the year is proof of the remarkable turnaround the Chinese economy has made after shrinking 6.8 percent in the first quarter. The data from the National Bureau of Statistics demonstrate China's strong recovery, in contrast to the health of the other major economies, indeed the global economy, which are still reeling under the impact of the novel coronavirus outbreak.

China's impressive GDP growth in the second quarter can be attributed to the much better than expected performance of various sectors. With China resuming production and other economic activities after having largely controlled the epidemic at home, industrial added value－which increased 4.8 year-on-year in June－and private industrial enterprises above designated size powered the economic recovery in the early stage.

Thanks to the recovery of the real estate market, investment in the real estate sector has increased. Actually, in the first half, real estate investment recovered fastest among fixed asset investments, which increased 1.9 percent year-on-year.

China's foreign trade grew despite facing an unfavorable external environment, with both imports and exports rising in June. In particular, exports have increased for three consecutive months starting April, greatly contributing to the better than expected growth of foreign trade.

Emerging industries were the highlights of China's economic activity in the first half. Investment in high-tech manufacturing industry and high-tech service industry increased 5.8 percent and 7.2 percent year-on-year respectively in the first half. And the new economy, featuring "digital economy", is helping transform the traditional industrial model and driving China's economy.

But despite the Chinese economy showing a strong recovery trend, some uncertainties remain in terms of economic growth in the second half of the year. The strong economic rebound in the second quarter was made possible mainly because of supply side recovery, while consumption recovery remained sluggish and nominal expenditure per capita declined 5.9 percent year-on-year, with the actual decline being 9.3 percent.

The main reason for sluggish consumption recovery is that people are still skeptical about spending money on non-essentials due to pressure of unemployment and decline in incomes thanks to the impact of the epidemic. In the first half, per capita disposable income declined 1.3 percent after adjusting for inflation, and the urban surveyed unemployment rate was as high as 5.7 percent in June.

As the coronavirus pandemic has not been effectively controlled in most countries, China's economic recovery faces uncertainties. Many major trade partners of China have been facing economic stagnation for months, with Chinese exports and intermediate imports facing new challenges. Worse, the global industrial chain and supply chains, already severely disrupted due to the pandemic, could even break in the future.

Also, the Sino-US trade frictions could gradually extend to other fields, further impeding China's foreign trade and growth prospects. In addition, the most serious floods in decades have been battering the country, including major manufacturing and export hubs.

With the pandemic seriously undermining the global economy, and the global financial market witnessing severe fluctuations, there is an urgent need to strengthen the engine of China's sustainable economic growth. As Vice-Premier Liu He said, a new "dual cycle" development pattern centered on domestic circulation and promoting integration of the domestic and global economies is gradually taking shape.

The "dual cycle" development pattern focuses on the balanced development of the domestic and international markets, and therefore China should focus both on the external market and the domestic potential of development. Also, China should further improve the social security system and take measures to help increase people's disposable income, in order to encourage them to spend more, expand domestic consumption and promote domestic market prosperity. And the government should enhance its macro-control capacity to make macro-economic policy more effective.

Besides, governments at all levels should improve their services, and provide information and technological support for enterprises so they can adapt to the advancements in digital economy, and help original equipment manufacturers build their own brands and establish high-level trading platforms for enterprises, in order to strengthen the new engines of economic growth.

The author is a researcher at the National Academy of Development and Strategy and a professor of economics at Renmin University of China.

The views don't necessarily reflect those of China Daily.