Title: China's Economy Is Expected to Shift to a Self-Sustaining Recovery Driven by Domestic Demand

In the first half of this year，China's economy was facing a number of problems，such as the repeated local outbreaks of COVID-19 in China and other countries，the not-yet-stabilized domestic economic recovery，the increased pressure of imported inflation and the rising leverage ratio after the outbreak. In response to the above-mentioned problems，the macro-policies took effect promptly and achieved remarkable results. In the second quarter，China's GDP grew by 7.9% year-on-year，showing a sustained and stable recovery trend; the two-year average growth rate reached 5.5%，which was close to the potential economic growth rate. Exports and real estate were still the main pillars of China's economy in the first half of the year，while consumption and manufacturing investments recovered a bit slowly.

Looking into the second half of the year，the accelerated global vaccination may lead to a gradual restoration of overseas production，and China's economy，which is usually driven by overseas demand，is expected to shift to a self-sustaining recovery driven by domestic demand. At the same time，real estate investment，in the face of policy constraints，will likely fall from the high level，but with the orderly progress in epidemic prevention and control，the recovery of the domestic service industry is expected to accelerate; and with the reduction of industrial costs，such as the implementation of the reserve requirement ratio (RRR) cut，the investments in manufacturing enterprises will likely be supported. Granted，with the practice of the new monetary theory in developed countries，the global inflation rate may rise significantly，continuous attention should still be paid to the risk of imported inflation. Against the backdrop of a rising base number，China's GDP growth rate is expected to fall below 6% in the second half of the year，and its annual GDP growth rate will be around 8.5%.

China has prominent advantages in industrial chains，but the rising base number may lead to a marginal slowdown in the second half of the year