... the head­winds to growth are likely to mit­i­gate some­what in the sec­ond half of the year, even as the down­ward pres­sure from the weak­ness of real es­tate con­struc­tion re­mains ...

China Daily (Canada) - - FRONT PAGE -

in ser­vices and a re­lent­less change in the rel­a­tive price in fa­vor of ser­vices is the key to re­bal­anc­ingChina’s econ­omy.

How­ever, since mid-2014 the ser­vice sec­tor re­ceived a sig­nif­i­cant boost from the stock mar­ket rally and the as­so­ci­ated ac­tiv­ity. We ex­pect the sharp cor­rec­tion in the stock mar­ket will have con­sid­er­able ef­fect on the turnover in the fi­nan­cial sec­tor, which could shave around 0.2 per­cent­age points or so off GDP growth in the third quar­ter. In­deed, this may be the most sig­nif­i­cant chan­nel via which the stock mar­ket tur­moil im­pacts the real econ­omy – more sig­nif­i­cant than wealth ef­fects.

Ex­port mo­men­tum was sub­dued in the sec­ond quar­ter, but, in our view, is not as weak as the of­fi­cial data sug­gests. And it picked up a bit in June. Mean­while, ac­cord­ing to Royal Bank of Scot­land es­ti­mates, the mo­men­tum of “nor­mal” im­ports – used in China’s own econ­omy – im­proved sig­nif­i­cantly in June, sup­port­ing the im­pres­sion that do­mes­tic de­mand mo­men­tum im­proved in June.

Build­ing on the re­cent de­vel­op­ments, the head­winds to growth are likely to mit­i­gate some­what in the sec­ond half of the year, even as the down­ward pres­sure from the weak­ness of real es­tate con­struc­tion re­mains, mean­ing that GDP growth should not be much weaker than 7 per­cent

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