Although analysts are expecting slower growth of the Chinese economy, in the second quarter it grew much faster than expected as output and consumption went up. According to the National Bureau of Statistics, the economy made growth of 6.9% in the second quarter from a year earlier, which is the same rate as the first quarter.On a quarterly basis, growth rose to 1.7% from 1.3% in the first quarter.
Strength in retail sale and industrial output data served as a counterweight to a weak start for China stocks. All that may have been linked to planning tighter financial regulations.
This year’s China’s economy growth really surprised everyone and went beyond expectations. This is due to recovering exports and property construction remaining strong. However, many analysts think that Chinas growth will slow down towards the end of the year as policy measures will restrain hot housing prices and debt build-up will influence growth.
“Overall, the economy continued to show steady progress in the first half…but international instability and uncertainties are still relatively large, and the domestic long-term buildup of structural imbalances remains,” the statistics bureau said in a statement with the data.
The government is trying to reach the goal of 6.5% this year, which will be a bit lower than the last years 6.7%, weakest
tempo in the last 26 years. Factory output rose 7.6% in June from a year earlier. That was the fastest tempo in three months, and fixed asset investment went up to 8.6% in the first six months of the year. Retail sales also grew 11.0% in June from a year earlier, which is the fastest pace since December 2015, analysts expected a rise of 10.6%. Growth of global demand for Chinese products could be a blessing for the country’s leaders as they seek to control a dangerous increase of their debt that has ballooned to 277% of GDP.
Chief economist at Commonwealth Securities in Sydney Craig James said “(The new data) is encouraging for global growth as well because China is the second largest economy on the planet.”
“Based on this data, there is no need for easing and no need really for tightening either because inflationary pressures are very much contained. So I think the People’s Bank of China just continues to be watchful.” he said.
In June China’s steel output rose 5.7% to a record 73.23 million tonnes. Due to big profits from rallying prices, mills ramp up production. This is happening while authorities are pushing supply-side reforms, wanting to cut excess capacity in coal and steel sectors.
Last week’s data revealed that Chinas imports and exports grew very faster than expected in June from a year earlier. That fact could reduce the weakness in other parts of economy in the second quarter
According to Reuters poll of analysts, China’s economic growth is expected to drop down to 6.6% further in 2017, and eventually slow it’s pace in the third and the fourth quarter. The PBOC started guiding market interest rates higher during the first quarter, including immediately after the U.S. Federal Reserve raised rates in March.