Chinese economy revs up recovery engine as May data improves

China's key economic indicators showed improvements in May, adding to evidence that the world's second-largest economy is poised for a steady recovery from the COVID-19 impact and policies to coordinate epidemic control and economic growth take effect.

"Overall, China's economy has gradually overcome the negative impact of the epidemic and showed a momentum of recovery," said Fu Linghui, spokesperson for the National Bureau of Statistics, when commenting on the data.

Official data showed that China's value-added industrial output rose 0.7 percent year on year in May, reversing the 2.9 percent decline in April, an encouraging sign that factory activity rebounded amid work resumption.

For instance, Shanghai and Jilin, industrial bases where production was disrupted by the Omicron outbreak, saw much smaller declines in industrial output compared with April.

China's foreign trade continued to shore up growth in May, registering a growth of 9.6 percent, up 9.5 percentage points from a month ago. Exports logged a better-than-expected double-digit increase of 15.3 percent, versus 1.9 percent in April, as logistics blocks eased and ports resumed operations.

Retail sales, a major indicator of consumption strength, continued falling in May but saw a narrower decline of 6.7 percent, thanks to the gradual improvement of domestic demand.

"On the demand side, the vital role of investment was enhanced," Meng Wei, spokesperson for the National Development and Reform Commission, told a Thursday press conference, noting the importance of practicing an appropriate degree of advance investment for infrastructure projects and facilitating the 102 major programs introduced in the 14th Five-Year Plan.

In the first five months, investment in infrastructure development rose 6.7 percent from a year ago, up 0.2 percentage points from the first four months.

Meng also highlighted China's capacity in keeping inflation under control in May, with consumer prices growing at a rate unchanged from the previous month, and the rise of factory-gate prices slowing to 6.4 percent.

The "hard-won" price stability came against the backdrop of high commodity prices globally and severe inflation risks in some major economies, Meng said, deeming the country a significant "stabilizer" for global prices.

Despite positive signals in sight, analysts still called for vigilance as geopolitical tensions, the protracted epidemic, and the U.S. Federal Reserve's rate hikes continue to weigh on the global economic outlook and China's consumption remains weak and employment remains under pressure.

Wen Bin, chief analyst at China Minsheng Bank, urged greater efforts to boost domestic demand and employment, give bailouts to industries and individuals in trouble, and improve confidence among market entities.

The State Council has unveiled a package of 33 measures in six aspects recently to further stabilize the economy.

Wednesday's State Council executive meeting decided that China will support private investment and take forward projects that deliver multiple effects as part of the efforts to better spur effective investment, consumption, and employment.

The Chinese economy is expected to see reasonable growth in the second quarter on the basis of effective COVID-19 control and implementation of a raft of pro-growth measures, Fu said.

"Considering a relatively low inflation rate and fiscal deficit rate, ample forex reserves, and the room for macro regulation, China has conditions to address risks and challenges and overcome economic fluctuations," said Long Haibo, a researcher with the Development Research Center of the State Council.