7 percent second quarter growth in China beats expectations

7 percent second quarter growth in China beats expectations

Growth in the second largest economy in the world, China, beats expectations in the second quarter, but it was still the weakest showing since the global financial crisis.

From a year ago, the economy grew 7%-matching growth in the first three months of the year, which was at the lowest since 2009 when it dropped to 6.6%.

Growth has been hampered by a weaker factory production and property market.

However, Beijing has rolled a series of stimulus measure amid the slowdown.

Interest rates have been cut by the central bank for the fourth time since November last month in order to boost economic activity.

However, economists are continuing to make calls for additional ease despite the better-than-expected numbers as volatility in the stock markets has sparked concerns of financial turmoil in the country.

It was expected that growth would dip below the 7percent mark and come in at 6.9 percent for the April to June quarter- (follow this link for additional informational)

Monthly activity data which was released alongside GDP report, also beat expectations across the board to show signs of a rebound, with the factory output hitting a 5-month high, following increased bank lending reports on Tuesday.

For the second largest economy in the world, it has been a difficult year. Slowing growth in investment, domestic demand and trade has been compounded by a cooling property sector, deflationary pressure and recent equity market panic, as such signs of improvement might help buttress faltering investor confidence in the effectiveness of Beijing management.

Still, Beijing will have to provide liquidity in order to buttress its still-rickety stock exchanges- which have been described by the statistics bureau as key to economic stability- and to lower the cost of corporate financing, which is still higher than returns on investment for most companies.

Economists have called for more direct fiscal stimulus for supporting the local governments as they grapple with a mountain of debt.

Fiscals expenditure rose 13.9% on an annual basis in June, a sharp rise from May’s low 2.6% but well below April’s 33.2% spike.

Some analysts have been surprised by the positive readings questioning the accuracy of official data, suggesting they are more about reassuring investors than true performance reflections. For instance, June power output increased by only 0.5% year-on-year, though the factory output rose 6.8%-–business.html (follow this link for more information).

The National Bureau of Statistics rejected suggestions that figures were being inflated.

It is not just the government reporting a warmer second quarter; the recent independent China Beige Book survey also reported signs of broad-based recovery for the period, which it indicated was greatly driven by growth in the interior provinces.

“While actual growth is almost certainly a percentage point or two slower than the official figures show, there are good reasons to think that the latest figures are mirroring a genuine stabilization,” wrote Julian Evans-Pritchard, economist at Capital Economics in Singapore.

“There is growing evidence of improvement in the wider economy” he added.

The government’s forecast for economic growth for 2015 is around 7% which will be the weakest rate in 25 years.




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