China’s economy grows 7.5 per cent in Q2
China’s economy grew up by a more than expected 7.5 per cent in the second quarter of the year, with a slight revival in growth seen as reflecting the impact of stimulus and loosening measures unveiled by the government in recent months amid concern over a general slowdown in the world’s second-largest economy.
The economy is now on track to meet its annual 7.5 growth target, with first-half growth reaching 7.4 per cent — the same as in the first quarter, which marked the lowest in 18 months.
The government had in April, on the back of concern over growth in the first three months, unveiled stimulus measures such as reducing the reserve requirements for banks and directing local governments to speed up infrastructure projects.
The measures marked a turnaround of sorts after several months of tightening that had been aimed at curbing overcapacity in some sectors, such as real estate and steel. The first-half of the year has sharply underlined the tightrope walk the government faces between taking forward economic structural adjustment on the one hand, and maintaining growth and job creation on the other.
In the second quarter, manufacturing grew by a more than expected 9.9 per cent, while investments in fixed assets grew 17.3 per cent, the National Bureau of Statistics (NBS) said on Wednesday.
The two sources of concern in Wednesday’s data for some Chinese analysts were the cooling real estate market, a key driver of growth in China this past decade, and the increase in lending amid concerns of growing debt. Land prices fell for the first time in almost two years. The sale of residential buildings was down 9.2 per cent and floor space down 16.4 per cent.
“What we are seeing in the first-half of the year is a momentum of bifurcation and adjustment in the housing market,” said Sheng Laiyun of the NBS.
“In tier two and three cities there is a momentum of downward adjustment, in part caused by the base figures for last year being relatively high [rising by 30 per cent in the first-half of 2013]. In the short-term this bifurcation and adjustment will create pressure on the economy, but in the long-term this is conducive to the healthy growth of the housing market.”
Rising debt
Mr. Sheng also played down concerns of rising debt. New loans grew by 659 billion yuan ($106 billion) to 5.74 trillion yuan ($920 billion). Internal surveys, he said, showed that debt levels were “under control and below international safety levels”.
The Chinese Government has pledged to launch further reforms to transform its economy and boost domestic demand and consumption-driven growth, and move away from the State investment-driven model which, analysts say, is fuelling imbalances and overcapacity.
Consumption accounted for 54 per cent of growth in the first-half, and investment 48 per cent with exports recording negative growth, Mr. Sheng said. He said the growth in retail sales, by 12 per cent, had shown that the transformation in the economy was making some headway.
