China’s economy returned to growth in the second quarter, in one of the world’s first signs of recovery from the consequences of the coronavirus pandemic.
Gross domestic product grew 3.2% in the three months to the end of June, compared to the same period last year, beating expectations.
The figures follow the first annual decline in decades in the previous quarter, when China’s GDP fell 6.8 percent as the country struggled to cope with the impact of the Covid-19 crisis.
The return to growth coincided with a period when new reported cases of the virus had declined dramatically and increased state support for the industrial sector, even when consumption remained weak.
Liu Aihua, a spokesman for the country’s National Statistics Office, said the figures “demonstrated a boost to restorative growth and gradual recovery.” But it also pointed to “increasing external risks and challenges” as the virus continued to spread globally.
“We are confident in the economic recovery in the second half of this year,” he added.
Data from China, where the coronavirus was first discovered, is being watched closely as economies around the world grapple with the effects of the crisis.
Despite local outbreaks of the virus, including last month in Beijing, new daily cases have generally held at dozens per day in the second quarter as the pandemic has accelerated in the United States, Europe, and Latin America.
In April, China reduced blocking measures in Wuhan, the original hub of the virus, but continued to apply strict testing standards and closed the country to most international flights.
The increase in GDP in the second quarter was helped by strong industrial production, which increased 4.4 percent compared to the same period last year and increased in each of the last three months.
The Chinese state has supported industrial activity in recent months, in part by increasing the amount that local governments can borrow for infrastructure projects. An increase in construction has helped boost the country’s steel production when production has declined at other large domestic producers.
“In China, history depends a lot on what’s going on in the country,” said Louis Kuijs, head of Asia economics at Oxford Economics. “The momentum should be strong enough to make it unlikely [we] see another drop in GDP, “he added.
Retail sales fell 3.9 percent in the second quarter, indicating an uneven recovery and continued pressure on consumption. The unemployment rate in June was 5.7 percent, a slight improvement over the May figure of 5.9 percent.
Marcella Chow, global market strategist at JPMorgan Asset Management, noted the high savings rates of domestic consumers over the course of the pandemic, but added that consumption could recover quickly if confidence returned.
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China reported positive trade data this week, which showed that exports unexpectedly increased 0.5 percent in June compared to last year. But Ms. Chow said that external demand for Chinese exports may remain weak as a result of the blockade measures in Europe and the United States.
Shares in the Asia-Pacific markets were withdrawn after the data was released.
The CSI 300 index of listed stocks in Shanghai and Shenzhen fell 1.6 percent and Hong Kong’s Hang Seng Index fell 1.2 percent. In Japan, Topix was down 0.6 percent and Australia’s S & P / ASX 200 was down 0.9, while Kospi in South Korea was down 0.6 percent.
“Markets DO NOT like half-hearted Chinese spenders,” wrote Trinh Nguyen, senior economist for emerging Asia at Natixis.
Additional report from Alice Woodhouse in Hong Kong
