China's factory output and retail sales beat expectations in August, new data released on Friday showed, despite the economy being hammered by Covid-related curbs, heatwaves and a deepening property market slump.

The world's second-largest economy saw a bounce in business activity, with retail sales up by 5.4 percent year-on-year in August, according to official data.

That was well above the 3.2 percent growth forecast by Bloomberg analysts.

Industrial production also rose by 4.2 percent in August from a year earlier -- beating the 3.8 percent increase expected by analysts -- despite power outages in major production hubs due to heatwaves.

"The economy held out against multiple unexpected headwinds in August and showed a positive recovery with the help of more additional supportive policies," the National Bureau of Statistics (NBS) said in a statement.

China is the only major economy persisting with a zero-Covid strategy to stamp out virus clusters as they emerge, but swift and harsh lockdowns associated with that approach have sapped economic activity.

The central bank slashed key interest rates last month in a bid to kick-start the country's stuttering economic recovery.

Fixed-asset investment rose by 5.8 percent in the January-August period as the government poured billions of dollars into building new railways and industrial parks, NBS data showed.

The unemployment rate declined to 5.3 percent in August from 5.4 percent in the previous month.

But analysts warned that the worsening property slump and strict Covid restrictions could dampen growth.

"China's economy held up slightly better than anticipated last month, but momentum still weakened relative to July amid renewed virus disruptions and factory closures due to power shortages," said Julian Evans-Pritchard, senior China economist at Capital Economics.

"September is shaping up to be even worse. And while the current virus wave may have peaked, activity is set to remain weak over the coming months amid the deepening property downturn, softening exports and recurring Covid-19 disruptions."

China's economic growth was just 0.4 percent year-on-year in the second quarter -- its slowest rate since the initial Covid outbreak.

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