China is likely the only major economy that will have positive growth for 2020 as a whole, with gross domestic product now above its end-2019 pre-COVID-19 level, leading to a somewhat less deep global recession than anticipated. The economic recovery continued in August, with a small increase in retail sales from a year earlier and a slowing in the decline of private investment leading to a pickup in domestic demand, which until now lagged supply-side improvements. Still, that will not bring the global economy back to positive growth. 

China's GDP grew by 11.5 percent (quarter-on-quarter) in 2020-Q2 after a decline of 8.3 percent in Q1, with further positive growth expected when Q3 data is released in October. 

• Previously, supply-side improvements led the recovery, with industrial production up 5.6 percent (year-on-year) in August after a 4.8 percent increase in July. 
• Industrial production was boosted by stronger than expected exports, which were up by 9.5 percent in August owing to increases in medical supplies, but also to higher consumer electronics exports. 
• Export demand is still at risk of a sudden potential increase in U.S. trade tensions ahead of the November election, which if realized would subtract from China's growth.

A 0.5 percent year-over-year increase in August retail sales indicates the beginning of a recovery in private domestic demand. This was mainly the result of further easing of COVID-19 lockdowns and less social distancing, as the virus is largely under control with an average of only about 20 new cases a day, according to Johns Hopkins University's daily tracker. Looser restrictions on service providers such as movie theaters boosted consumption and revenue, with box office receipts in late August at about 90 percent of where they were a year ago. Retail sales overall were still down by 8.6 percent in the January-August period, as high household indebtedness likely dampened spending.

What recovery there was previously in domestic demand until now was due mainly to government-supported infrastructure investment. 

• Fixed asset investment was off by only -0.3 percent from January to August compared to the same period last year, after declining by 1.6 percent through July. 
• The fiscal impulse from on-budget spending is substantial this year, with the general government consolidated deficit expected to reach about 11 percent of GDP, nearly double that of 2019.
• Private sector investment remains depressed, declining 2.8 percent in January-August — although that's a narrowing of the 5.7 percent decline through July, which suggests that component of domestic demand is improving, too.

China's growth, while recovering, is still far below potential and the recovery remains uneven, especially with world demand sluggish. The latest data, however, relieves pressure on the People's Bank of China for monetary policy easing and will continue to support the yuan's appreciation against the dollar. Unlike advanced economy counterparts, the Chinese central bank has avoided flooding markets with liquidity and large cuts in interest rates, and seems to have acquiesced in the recent strengthening of the yuan in foreign currency markets.