Government spending boost for China

BEIJING: China’s economy grew slightly faster than expected in the second quarter as a government spending spree and housing boom boosted industrial activity, but a slump in private investment growth is pointing to a loss of momentum later in the year.

The world’s second-largest economy grew 6.7 percent in the second quarter from a year earlier, steady from the first quarter but still the slowest pace since the global financial crisis, data showed yesterday.

Analysts had expected it to dip to 6.6 percent but investors worry a further slowdown in China and any major fallout from Brexit would leave the world vulnerable to a global recession.

Steadier headline growth in China may conceal an economy increasingly lopsided, as growth becomes reliant on government spending and debt.

Signs of fatigue in the property market point to that the government may need to provide additional stimulus to hit its growth target of 6.5 to 7 percent.

There were some bright spots in the data, as consumption accounted for a greater amount of growth and retail sales and industrial output beat expectations. But first half bank lending hit a record and government spending jumped 20 percent in June.

Officials insist risks from higher debt levels are manageable but analysts believe a massive debt and bank restructuring is likely. – Reuters