Domestic demand stimulated industrial growth, Zhu said. Domestic market-oriented industrial output jumped 34.9 percent year on year, accounting for 86.9 percent of the total output. It was 0.6 percentage point higher than the same period last year, and 3.4 and 5.2 percentage points higher, respectively, than in 2008 and 2007.

Measures to boost sales of home appliances and cars and to subsidize old-for-new purchases have paid off, Zhu said. A total of 32.52 million sets of home appliances were sold in the first half of 2010, almost equal to that sold in all of 2009, and auto output and sales went up 48.8 percent and 47.7 percent, respectively, compared with the same period last year, he said.

Retail sales grew robustly in the first half of 2010, driven by an increase in average income and continued consumption incentives, especially in low-end retailing, said a report compiled by CCB International (Holdings) Ltd., a wholly owned subsidiary of the China Construction Bank.

Domestic demand will continue to be the main growth momentum in the second half, the report said.

Difficulties

But difficulties remained for the Chinese economy in the first six months of 2010, due to sovereign credit woes in Europe and problems with China's economic growth pattern.

The economic growth slowed from 11.9 percent in the first quarter to 10.3 percent in the second, down 1.6 percentage points. This has raised concerns of another round of decline for China's economic growth.

The decrease was largely because of the accelerating growth rates during the same period last year—in 2009, GDP growth jumped from 6.5 percent in the first quarter to 8.1 percent in the second quarter—as well as policies aimed to cool off excessive investments and speculations, Sheng said.

Despite the drop, the Chinese economy is still on track, because the second-quarter growth was basically consistent with the average rate between 2000 and 2009.

Sheng said China would maintain stability and continuity in macroeconomic policies, but increase flexibility, focus and predictability in accordance with complicated external conditions.

It was not necessary to worry about the slowdown of economic growth, and another round of decline is unlikely for the Chinese economy, he said.

And fluctuating raw material prices and growing labor costs posed additional challenges to the Chinese economy, Zhu said. Labor costs in the Yangtze River and Pearl River deltas, China's two manufacturing powerhouses, increased 20 to 25 percent in the first half.