China's industrial production grew more than expected in August as fiscal stimulus and exports boosted economic activity and retail sales recovered on domestic demand, official data revealed Tuesday.

Industrial production growth improved to 5.6 percent from 4.8 percent in July, the National Bureau of Statistics said. The rate was forecast to rise moderately to 5.1 percent.

At the same time, retail sales advanced 0.5 percent on year, in contrast to a 1.1 percent drop in July. Economists had forecast a marginal growth of 0.1 percent for August.

Fixed asset investment declined 0.3 percent during January to August period, which was smaller than the 1.6 percent decrease seen in seven months to July and the 0.4 percent fall economists' had forecast.

The urban unemployment rate came in at 5.6 percent in August versus 5.7 percent a month ago.

The tightening labor market and revival in consumer confidence suggests that the recovery in services activity has further to run, Julian Evans-Pritchard, an economist at Capital Economics, said.

What's more, growth in industry and construction is likely to remain strong since fiscal spending is set to be ramped up further during the rest of the year and the recent surge in industrial profit growth has also boosted the prospects for manufacturing investment, the economist noted.

Taken together, the economy is on track to return to its pre-virus growth rate before the end of the year, he said.

In a report released Tuesday, the Asian Development Bank said the developing Asia is set to enter its first recession in nearly six decades as the Covid-19 pandemic continues to disrupt global economic activity.

The region is forecast to shrink 0.7 percent this year. GDP is projected to rebound 6.8 percent next year.

The lender said the downturn is broad-based but China is an important exception. China's economy is forecast to grow 1.8 percent in 2020 before surging 7.7 percent next year.

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