Economists say that sluggish growth will force the government to launch additional stimulus measures in the coming months to support the economy – especially if Beijing wants to meet its annual growth target of 7%.
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“China does not underestimate its GDP deflator and we don’t overestimate our GDP”, National Bureau of Statistics spokesman Sheng Laiyun said Wednesday.
PUBLIC PESSIMISM: “I’m not optimistic about the economic outlook in the second half of the year“, said Wang Zhong, 30, who works in purchasing for a Shanghai restaurant chain.
“China’s trade with the outside world is falling, and real estate investment – the primary engine of growth until past year – is going through a prolonged slump”, Mr Lawson said.
Growth was expected to dip below the 7% mark and come in at 6.9% for the April to June quarter.
However, Capital Economics said one reason why the improved economic news flow has failed to arrest the stock market decline, which has seen shares shed more than 25% of their value over the last month, is investors’ lack of faith in the official data.
“With these efforts, the national economy has stayed “in the proper range” in the first half as major economic indicators gradually recovered, indicating stabilization and improvement”, Sheng said, citing steady employment and price levels.
Property investment grew 4.6 per cent year-on-year, while retail sales of consumer goods rose 10.4 per cent. Authorities have been taking preemptive steps since last November when the People’s Bank of China, the central bank, made the first of four cuts to benchmark interest rates. But too fast a deceleration in investment can be harmful to overall growth.
The largest growth driver appears to be the services sector that grew 8.4 percent in the second quarter up from 7.9 percent in Q1, said HSBC.
“Stock investors at present care more about what the government policy towards the market is, whereas the connection between the economy and the market has somehow loosened”.
Yesterday began on a positive note with the growth figures and monthly activity data that also beat expectations across the board, with factory output at a five-month high, following reports of increased bank lending on Tuesday.
Chaotic trading on the country’s key stock markets in recent weeks has added to uncertainty for China’s financial system which faces challenges including indebtedness and an opaque “shadow banking” sector. “A shift of gear in economic development has not inflicted much cost, as per capita income keeps rising, more jobs are created, and environmental maladies are being reduced”. It could also be argued that the failure of the economy to respond positively to a 150 per cent rally in the stock market over the past year reflects the weak fundamental state of the economy, which could once again be exposed by more policy support. Manufacturing has also languished with official and private surveys showing it hovering near the borderline between expansion sand contraction.
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“The resilience of retail sales in June is a further encouraging sign that downside risk, while not negligible, is receding, despite recent equity-market volatility”.
