Economic recovery maintains a steady course

China’s economy maintained a steady recovery in July, with the services sector growing at a faster pace.

The value-added industrial output of major enterprises extended the rally, growing by 4.8 percent year on year, the same pace as June, according to data from the National Bureau of Statistics on Friday. 

On a month-on-month basis, industrial output rose 0.98 percent from June.

The country’s overall efforts to control the COVID-19 pandemic and promote economic and social development have continued to see positive results, said bureau spokesman Fu Linghui.

A proactive fiscal policy and prudent monetary policy continued to exert their power, Fu said. The economy overcame the adverse effects of the pandemic and the flood to maintain a stable recovery, with major indicators continuing to pick up.

In the January-July period, major industrial enterprises posted value-added output down 0.4 percent from the same period last year, compared with a 1.3 percent decline in the first six months. 

The mining industry fell 2.6 percent year on year in value-added output last month, while manufacturing jumped 6 percent, and the electricity, heat, gas, water production and supply sectors advanced by 1.7 percent.

Output of the equipment manufacturing sector and the high-tech manufacturing industry grew by 13 percent and 9.8 percent, respectively, 8.2 percentage points and 5 percentage points faster than overall industrial output growth, indicating continuous optimization of the industrial structure, the bureau said.

"Pent-up demand and catch-up production lost some steam in July," financial services company Nomura said.

Specifically, output growth of integrated circuits and industrial robots dropped to 9.0 percent year on year and 19.4 percent, respectively, from 11.1 percent and 29.2 percent in June. 

Output growth of smartphones in volume terms fell to 19.2 percent year on year in July from 26.1 percent in June. "This, together with the sharper contraction in domestic mobile phone shipments in the month, suggests weakness in the mobile phone industry still lingers, especially amid rising US-China tensions," according to Nomura. That said, output growth of autos rose further to 26.8 percent year on year from 20.4 percent in June.

"The weaker-than-expected growth in industrial production masks the outperformance of strategically important sectors such as high-tech and automobile sectors," said Betty Wang, senior China economist of the Australia and New Zealand Banking Group.

The services sector expanded 3.5 percent in July from a year earlier, compared with the 2.3 percent rise in the previous month, while for the January-July period it fell 4.7 percent year on year, compared with the decline of 6.1 percent in the first six months, according to the bureau.

Among them, information transmission, software and information technology services grew by 13.7 percent, the same pace as June. The financial sector and the real estate industry rose 10.4 percent and 7.8 percent, respectively, 2.9 percentage points and 3.9 percentage points faster than the figures in June.

Headline retail sales growth in nominal terms recovered modestly, falling 1.1 percent year on year in July compared with the 1.8 percent decline in June, but weaker than market expectations.

By major product, auto sales growth rebounded strongly to 12.3 percent year on year in July, reversing the 8.2 percent drop in June, in line with the data reported by the China Passenger Car Association, which indicated retail sales growth of passenger cars by volume jumped to 7.7 percent year on year from the 6.0 percent decline in June.

Fixed assets investment growth, meanwhile, picked up to 6.1 percent year on year in July from 5.3 percent in June.

July’s rise in year-on-year FAI growth was led by property investment, Nomura noted.

Infrastructure investment growth softened to 7.7 percent year on year in July from 8.4 percent in June, likely weighed on by floods along the Yangtze River. By type of ownership, growth of FAI by privately owned enterprises turned positive at 2.2 percent year on year from the 1.2 percent drop in June, while growth of FAI by state-owned enterprises only inched up to 12.7 percent from 12.6 percent over the same period.