China economic expansion exceeds estimates on factory rebound

Beijing, China - China’s economy maintained its momentum last quarter, as global trade and domestic demand spurred a pickup at the nation’s factories.

China’s gross domestic product (GDP) increased 6.9 per cent in the second quarter from a year earlier, compared with a 6.8 per cent median estimate in a Bloomberg survey, matching the pace of expansion in the first quarter. Industrial output rose 7.6 per cent in June from a year earlier, compared with an estimated 6.5 per cent increase.

The expansion highlights the resilience of China’s economy, as activity has remained robust even as policy makers have tried to curb excessive and speculative borrowing, leading to a slowdown in money supply growth.

Synchronised growth in most developed markets has meant that exports have helped to keep the expansion on track, and the effects of a cooling property market are yet to kick in.

The statistics bureau said the result ‘provides a solid basis’ for meeting the full year growth tar- get of 6.5 per cent or above.

“The immediate driver is much stronger industrial production, which is being lifted by many factors: Recovering exports, very low inventory, robust retail sales and investment-led demand,” said Gene Ma, chief China economist at the Institute of International Finance in Washington.

The country’s fixed-asset investment climbed 8.6 per cent in the first half of this year, while retail sales jumped 11 per cent from a year earlier in June, compared with a median estimate of 10.6 per cent in a Bloomberg survey

“It shows that Beijing’s financial deleveraging was well-timed and carefully targeted not to have much spillover on the real economy,” said Rob Subbaraman, chief economist for Asia ex-Japan at Nomura Holdings Inc in Singapore.

“Fiscal stimulus remains an important driver of growth. It’s also encouraging to see more signs of rebalancing with the pickup in retail sales growth,” Subbaraman added.

In the second quarter, China’s output expanded 1.7 per cent from the first three months. Crude steel production expanded to an all-time high last month.

Consumption contributed 63.4 per cent to GDP growth in the first half and services accounted for 54.1 per cent of GDP value in the first half.