Economy showing signs of rebound as stimulus stepped up, experts say

Shoppers buy fruit at a supermarket in Shijiazhuang, Hebei province. [Photo by Jia Minjie/For China Daily]

China's economy is showing signs of a rebound with a gradual improvement in demand, warming economic activity and an easing of deflationary pressure, experts and executives said.

They voiced optimism about China's economic prospects, saying the economy is expected to gather pace in the coming months given the continuing recovery and a raft of pro-growth policies taking effect in the third and fourth quarters.

National Bureau of Statistics data released on Saturday showed that China's consumer inflation recovered in August after dropping into negative territory the previous month for the first time in more than two years.

China's consumer price index, a main gauge of inflation, rose by 0.1 percent year-on-year in August, up from a 0.3 percent dip in July. The growth in core CPI, which excludes volatile food and energy prices and is deemed a better gauge of the supply-demand relationship in the economy, rose by 0.8 percent year-on-year in August, the NBS said.

"China has stepped up countercyclical adjustment with a raft of targeted stimulus policies," said Zhou Maohua, an analyst at China Everbright Bank. "China's economic recovery will continue to gather steam in the remainder of the year with stronger policy support and improvement in consumer sentiment and business confidence."

However, Zhou noted that growth recovery currently remains patchy as enterprises in some sectors still face difficulties. He said China is still in the phase of gradual recovery amid weak prices, which is adding more pressure on policymakers to take further steps to shore up the world's second-largest economy.

Louise Loo, lead economist at British think tank Oxford Economics, said headline CPI returned to positive territory in August, as increases in services-related segments more than offset the continued drags from lower oil and pork prices. The less negative producer price index was primarily driven by a smaller year-on-year decline in oil prices.

China's August PPI, which gauges factory-gate prices, was down 3 percent from a year earlier after the 4.4 percent annual contraction seen in July, according to the NBS.

According to Loo, her team expects year-on-year CPI and PPI growth to average 0.5 percent and minus 3.2 percent this year, recovering to 1.8 percent and 1 percent next year.

Zhang Xuewu, chief of the price analysis and forecasting division at the Price Monitoring Center, which is part of the National Development and Reform Commission, the country's top economic regulator, said: "As the economy continues to improve, consumer demand will steadily recover during the coming Mid-Autumn Festival and National Day holidays, infrastructure construction will enter its peak season, and corporate production demand will also be further unleashed."

Looking forward, Zhang expects the CPI to continue to edge up, while the decline in the PPI will narrow further.

With the help of a raft of recently announced government measures to support growth, China's economy is gradually improving with signs of warming economic activity.

Data from media group Caixin showed China's factory activity returned to expansion in August on improvements in both supply and demand.

Caixin China General Manufacturing Purchasing Managers' Index rose to 51 in August from 49.2 in July, above the 50-point mark that separates growth from contraction.

Halma plc, a global lifesaving technology company headquartered in the United Kingdom, is bullish on China's huge growth potential. It recently opened an 11,000-square-meter new shared facility in Shanghai, to support further innovation and growth in China as well as the rest of the Asia-Pacific region.

"With around 20 percent of the world's population in China, it remains a key market, enabling us to deliver against our purpose," said Marc Ronchetti, group chief executive of Halma.