China’s economy, the first to succumb to the coronavirus, is proving to be the fastest to recover. An industry-powered rebound is pushing the Asian nation out of the historic first-quarter slump and toward the prospect of being the only major economy to expand this year. Economists surveyed by Bloomberg forecast growth of 2.0%.

To get there, it has squashed a number of smaller virus outbreaks, weathered the collapse in global demand, and kept markets buoyant despite persistent fears of a broad technology Cold War with the U.S. The reasons for China’s performance so far range from a populace willing to accept and implement strict virus control measures to the fact that the world still needs its exports. Sales abroad jumped in July as factories and retailers elsewhere re-opened.

Yet the official data still obscure the full scope of unemployment after earlier shut-downs, and without a rapid brightening in consumers’ mood, the recovery can still falter. An event like the resurgence of President Donald Trump’s trade war could mean the existing restrained approach to stimulus, led mostly by extra bond issuance, would have to change.

Employees work in a paint shop at the Geely Automobile Holdings Ltd. plant in Ningbo, Zhejiang Province, China, on April 28
Employees work in a paint shop at the Geely Automobile Holdings Ltd. plant in Ningbo, Zhejiang Province, China, on April 28 | Bloomberg photo

Talks on the trade deal with the U.S. due for this weekend were postponed. Further evidence of a solid economic performance, with caveats, came Friday. July data showed that industrial output rose 4.8% in the month from a year earlier, the same as in June, but lower than economists’ expectations. Overall retail sales fell 1.1%, compared to a projected 0.1% increase, while fixed-asset investment was 1.6% lower in the first seven months of the year.

“China’s recovery is largely on track,” said Tommy Wu, senior economist at Oxford Economics Ltd in Hong Kong. “Investment plays a bigger role, where as in the rest of the world fiscal policy support is mainly on the employment and the smaller enterprise front. This explains why China’s economy can gather pace quicker and gain a firmer footing at a relatively earlier stage of the recovery.”

President Xi Jinping is accelerating his push for an economy that can be more independent amid the broadening confrontation with the U.S. In a series of remarks over the past few weeks he’s touted the so-called “dual circulation” development model, in which a more self-reliant domestic economy serves as the main growth driver supplemented by certain foreign technologies and investment.

That dovetails with the more immediate investment-led fiscal policy strategy. The government is spending heavily on infrastructure, particularly on future-oriented technologies. Some 3.75 trillion-yuan ($540 billion) worth of so-called special bonds will be issued this year to fund such efforts.