China’s strong growth paves way for deeper reforms
GDP up 6.9% in Q2 from a year earlier, the same rate as Q1
BEIJING: China’s economy expanded faster-than-expected in the second quarter, setting the country on course to comfortably meet its 2017 growth target and giving policymakers room to tackle big economic challenges ahead of key leadership changes later this year.
The boost to growth was in partly driven by firmer exports and production, in particular steel, which could heighten trade tensions as both the United States and China begin economic talks this week.
US President Donald Trump has made the US trade deficit with China a top agenda item in bilateral talks and has also flagged the steel trade as a point of contention.
China’s gross domestic product (GDP) rose 6.9% in the second quarter from a year earlier, the same rate as the first quarter, the National Bureau of Statistics said yesterday. That was higher than analysts expectations for the economy to expand 6.8%.
Economic data from the second quarter has prompted a number of analysts to upgrade their GDP forecasts for China for 2017, although some moderation in growth is expected later this year as policymakers’ efforts to rein in property and debt risks weigh on activity.
“In general, we expect GDP growth to remain robust in the second half but slower than the first half, due to the high base,” Citi economists said in a research note. “Looking ahead, uncertainty remains on investment and trade.”
The bank has raised its 2017 annual GDP projection to 6.8% year-on-year from 6.6% previously.
The robust data briefly helped China’s major stock indexes recoup earlier losses, before retreating later in the session.
The second quarter numbers put the economy on a strong footing to meet China’s growth target of around 6.5% in 2017, which would give policymakers room to defuse financial risks.
While growth in the high-flying property sector has cooled this year, a rebound in exports after several years of decline has helped prevent any broader slowdown in China’s economy.
Retail spending and factory output were also bright spots in the first half. Retail sales growth picked up to 10.8% in the second quarter from 10% in the first quarter, a Reuters calculation based on official data showed.
Factory output also picked up in the second quarter, though the 6.9% growth for the first half was only a slight pickup from recent quarters.
The improving economy is no doubt welcome news ahead of a reshuffle of the top ranks of government at an autumn congress of the ruling Communist Party of China, with leadership keen to ensure a smooth run-up to the meetings.
President Xi Jingping is widely expected to tighten his grip on power at the party congress, which could give him more clout to push through what analysts say are long overdue but painful reforms such as restructuring massive state firm debt. — Bloomberg