China posts 7% GDP growth in Q2

China’s economic growth held steady at seven per cent in the second quarter, beating expectations in the backdrop of recent stock market crash and forecasts of slowdown in the world’s second-largest economy.

The GDP figures announced by the National Bureau of Statistics (NBS), China’s weakest performance since the global crisis, remained unchanged from the first quarter.

The figure is in line with the government target of about seven per cent growth this year and comes in the backdrop of the recent stock market plunge that threatens to disrupt the country’s economic reform plans.

In the first half of this year, the gross domestic product (GDP) hit 29.7 trillion yuan (USD 4.9 trillion) up seven per cent year-on-year, the NBS data said.

The national economy has stayed “in the proper range” in the first half as major economic indicators gradually recovered, indicating stabilisation and improvement, it said.

During the first half, industrial output grew 6.3 per cent year-on-year and fixed-asset investment climbed 11.4 per cent.

Property investment grew 4.6 per cent year-on-year, while retail sales of consumer goods rose 10.4 per cent.

Industrial output in China grew 6.3 per cent year-on-year in the first half (H1) of 2015, slightly down from a 6.4 per cent increase in the first quarter.

Investment in China’s property sector rose 4.6 per cent year-on-year to 4.4 trillion yuan (USD 708.8 billion) in the first half of 2015, the NBS said projecting a positive trend of real estate market whose slowdown has raised concerns of a bubble.

Also China’s fixed-asset investment grew 11.4 per cent year-on-year in the first half of 2015, the NBS said.

China’s central bank, the People’s Bank cut interest rates for the fourth time since November last month to boost economic activity.

Economists are however, continuing to call for more easing despite the better-than-expected numbers as volatility in the stock market has sparked concerns of financial turmoil in the country.

Frederic Neumann, co-head of Asian economic research at HSBC expects more fiscal and monetary easing in the coming months in order for China to achieve sustainable growth.

“Stimulus measures rolled out over the past nine months are beginning to show some traction. But work remains to be done,” he told the BBC.

The mainland’s benchmark index, the Shanghai Composite, had lost almost a third of its value in the three weeks from mid-June.

The seven per cent GDP in the second quarter which is the target announced by Premier Li Keqiang is a bit of surprise in the backdrop of steady projections of downturn in China’s economy.

Last week the International Monetary Fund (IMF) maintained its forecast of 6.8 per cent for China’s economic growth this year while ruling out any negative impact due to the recent stock market turmoil.

In its World Economic Outlook Updated, the IMF forecast the Chinese economy to grow 6.3 per cent in 2016 and 6 per cent for 2017.

“In constructing forecasts for China, our assumption continues to be that the Chinese authorities will indeed allow a moderate slowdown of growth, while also using monetary and fiscal policies if needed to prevent too sharp a slowdown,” Olivier Blanchard, IMF economic counselor and director of research department said in Washington.

He said the recent stock market crash wiping out USD 3.2 trillion capital will have little effect on the world’s second-largest economy. “The bubble has burst... And that’s potentially worrisome,” he said.

“How worrisome is it? We don’t think very much,” he said, explaining that the capitalisation of the Chinese stock market in the GDP is much smaller than in countries such as the US, therefore less effect on the overall economy.

“My sense is that Chinese people should be used to the wild gyration of the stock market. This is not the first one.

It may not be the last one. So, I think it’s very much a sideshow,” he said.

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