Despite more sanctions piling on from the US, China still had reason to celebrate this month with two important achievements. First, it became the world's first major economy to return to economic growth as the world battles with the Covid-19 pandemic.
It also successfully launched its first Mars probe, named Tianwen-1, heralding a new era in China's deep-space exploration. If it succeeds, Tianwen-1 will mark the first time in human history that a Mars expedition has completed orbiting, landing and roving in a single mission.
The rapid economic rebound came as a surprise to many and revived hopes that, as in previous recessions, China may again help the global economy to recover. In the three months to the end of June, China's economy grew by 3.2% from the same period last year. This compares with a contraction of 6.8% year-on-year in the first quarter.
While this is very encouraging, there was also some scepticism about the sustainability of the recovery as it was largely driven by spending on infrastructure by local governments. This is a familiar policy that has previously led to large increases in debt as well as distortions in investment.
There are also concerns that the continuation of such a policy will support inefficient state-owned enterprises, which will be a drag on the wider economy. However, the growth figures also revealed big increases in sunrise industries such as pharmaceuticals, medical equipment and technology projects including 5G and data centres.
Another bright spot is China's national high-tech zones, which are also enjoying robust growth. According to Xu Nanping, the vice-minister of science and technology, revenue from high-tech zones rose by 10.3% in the year to the end of May. These zones cover industrial parks for developing industries ranging from biomedicine to electronics and have nurtured many of China's high-tech companies.
On the downside, the GDP numbers revealed that domestic spending is still far from recovered. Although most people have returned to work, many have lower incomes or have lost jobs, while the population at large is more cautious and frugal, spending less on travel, entertainment and eating out. This has been devastating for the hotel and catering industry, which shrank by nearly 30% for the half year, while retail sales also experienced a double-digit decline.
Given this mixed picture, people will be interested to know how the government plans to stimulate a broad-based recovery. We should learn more about this later this month as the senior leadership will meet and is expected to set out economic priorities for the rest of the year.
Suwatchai Songwanich is an executive vice-president with Bangkok Bank. For more columns in this series please visit www.bangkokbank.com