Editor's note: Liu Chunsheng, a special commentator for CGTN, is an associate professor at the Beijing-based Central University of Finance and Economics. The article reflects the author's opinions and not necessarily the views of CGTN.

The much-watched July national economic data has been officially released, serving as a key benchmark to gauge the strength of China's recovery and growth momentum in the second half of the year.

China's GDP reached 69.57 trillion yuan ($10.3 trillion) in the first half of the year, growing by 4.7% year on year at constant prices. The economy has maintained overall stability with a clearer shift toward high-quality and innovation-driven development.

Against a backdrop of sluggish recovery, lingering inflation, debt risks and geopolitical tensions across most major economies, the International Monetary Fund (IMF) revised its growth forecast upwards for China in the latest World Economic Outlook. This upward adjustment represents global investors' vote of confidence in China's economic fundamentals.

Steady growth amid widening structural divergence

According to July's data, growth is concentrated in emerging industries and export-oriented sectors, while traditional domestic demand sectors remain in adjustment.

Consumption continues to follow a pattern of buoyant services and subdued goods spending. Service consumption such as tourism, catering and recreational activities picked up notably during the summer travel season. However, demand for durable goods, including automobiles and home appliances, remains weak.

Investment displays a stark divergence between sectors. Investment in high-end equipment, digital industries and green manufacturing continues to expand rapidly, offsetting downward pressure from traditional sectors.  Meanwhile, real estate development investment remains in an adjustment cycle.

China has moved past the old growth model reliant on large-scale property and infrastructure expansion, prioritizing industrial investment centered on technological innovation.

Foreign trade stands out as a major bright spot. China's export mix keeps improving, with the share of labor-intensive goods declining while high value-added products including new energy equipment, energy storage and smart machinery gain traction.

Industrial output also reflects this divide, value-added high-tech manufacturing far outpaces overall industrial growth, with strong production of industrial robots, lithium batteries and intelligent equipment. 

All evidence shows that China stabilizes its economy via industrial upgrading, while domestic demand recovers at a moderate pace.

Rationale behind IMF growth forecast

Many economies face downward growth revisions, yet the IMF raised its outlook for China based on three tangible factors, eased China-US tariff tensions, strengthened domestic macro policies and the rise of new growth engines, all validated by July economic statistics.

First, easing bilateral trade frictions reduces external uncertainties. Tariff disputes over recent years raised trade costs and disrupted supply chain planning. Improvements in China-US trade relations enhance order visibility for exporters and underpin robust July trade performance.

Furthermore, domestic policies continue to deliver results. Fiscal resources support technological innovation, public services and infrastructure upgrades. Monetary policies cut financing costs for enterprises, alongside a suite of measures covering property market optimization, consumption promotion and private-sector support. Targeted measures help stabilize market entities and shore up confidence.

Moreover, emerging industries have evolved into tangible growth engines. The high-tech manufacturing sector maintains rapid expansion, with new energy, digital and smart manufacturing sectors driving production, investment, employment and exports. 

Growth spearheaded by new drivers delivers better quality, though it cannot generate explosive short-term expansion. It is worth noting that upgraded international forecasts serve only as reference and must be verified by sustained improvements in domestic demand indicators.

Outlook for China's second half

Looking ahead, China's economy will continue to pursue progress amid stability. 

Growth will gradually shift from supply-side industrial expansion and external demand toward domestic consumption. Structural challenges will persist during the transition between old and new growth drivers.

On the positive side, key growth pillars have room to improve. Consumption may gradually stabilize for physical goods while services remain vibrant as employment and household incomes improve. Investment in high-tech, green sectors and digital infrastructure will remain a core growth source. With improved private investment sentiment, overall investment vitality can further rise. 

Supported by globally competitive high-end manufactured goods and eased trade tensions, exports are set to remain resilient, even as weak global demand caps further expansion.

However, downside risks cannot be overlooked. The property sector adjustment drags on related industrial chains. Small and medium-sized enterprises face profitability pressures and barriers in industrial transformation. Sluggish overseas demand and geopolitical volatility add external uncertainties. These challenges are transitional growing pains instead of signs of fundamental economic decline.

Macroeconomic policies will remain targeted. Policymakers will safeguard employment and people's livelihoods, while scaling up support for innovation and emerging industries.