Yet, despite the improvement in the second quarter, the economy remains on life support in the form of continued monetary and fiscal stimulus. Renewed optimism has resulted in a stock market frenzy and a strengthening USD/CNY exchange rate.В ChinaвЂ™s economy is seeing some light at the end of the tunnel. But the recent approval by the Central Comprehensively Deepening Reforms Commission of a three-year action plan to strengthen the role of state-owned enterprises (SOEs) in the economy suggests that the already strong role of the state in China will be further enhanced yet further.Д¬hinaвЂ™s economy appears (so far) to be the first in and first out of the Covid-19 crisis. Governments in many countries have stepped up their role in the economy to prevent total mayhem. Doing so would come at the expense of efforts to establish a more sustainable economic growth model. It still remains to be seen if the CCP can hold back on becoming overly eager to show ChinaвЂ™s strength to the world by fueling a fast recovery. The government was right to abolish its GDP growth target for 2020.

The possibility of renewed or extended shutdowns, both in China and elsewhere around the globe remains a risk to the economy.

Most notably, consumption and employment remain suppressed. The V-shaped recovery is not taking place across the board and is at risk of losing its initial momentum. Although falling demand has left its mark on growth, the versatility of ChinaвЂ™s industrial complex proved to be a boon. The recovery also benefited from surprisingly resilient global demand for вЂњMade in ChinaвЂќ goods. A rescue package worth over 4 trillion RMB, that included tax cuts, lower interest rates, reduced utility prices and employment support, provided ChinaвЂ™s economy with a necessary lifeline as the shock unfolded. The government was swift to enact policies that sought to alleviate the immediate economic impact of the severe slowdown on companies and employees. Despite the improvement, the economic impact of the pandemic continues to leave its mark.ДЄfter the governmentвЂ™s initially slow response, ChinaвЂ™s economic recovery benefited from proactive government policies, which sought to control the outbreak of coronavirus, while limiting the economic fallout. GDP growth bounced back to 3.2 percent in the second quarter following a contraction of 6.8 percent in the previous quarter.

ChinaвЂ™s economy made a comeback in the second quarter, raising hopes for a swift recovery.

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