Beijing: China’s GDP grew by 7 per cent in the second quarter, its weakest growth since the global financial crisis in 2009, beating forecast of a slowdown in the world’s second-largest economy rattled by the recent stock market crash and falling exports. In the first half of this year, the gross domestic product (GDP) hit 29.7 trillion yuan (USD 4.9 trillion) up 7 per cent year-on-year, the National Bureau of Statistics (NBS) data said.
The national economy has stayed “in the proper range” in the first half as major economic indicators gradually recovered, indicating stabilisation and improvement, it said. The GDP figures announced by the NBS also remained unchanged from the first three months of the year, which was the lowest since 2009 when it fell to 6.6 per cent.
China’s economy, a key driver of world growth, expanded 7.4 per cent last year, slower than the 7.7 per cent in 2013. The figure is in line with the government target of about 7 per cent growth this year. However, the crash of the Shanghai Composite – which lost almost a third of its value in the three weeks from mid-June – has raised questions about the government’s ability to manage the economy, which is slowing down after years of double-digit GDP growth.
Beijing has rolled out a series of stimulus measures to boost investor confidence and China’s central bank has cut interest rates four times since November last year. Economists are however, continuing to call for more easing despite the better-than-expected numbers as volatility in the stock market has sparked concerns of financial turmoil in the country.
The ruling-Communist party is also trying to steer the country’s economy to slower, more sustainable growth, fueled by domestic consumption rather than investment and exports. China’s total trade declined in the first half of this year, falling well behind the government’s targets, and posing a significant weight on growth.
China’s total foreign trade dropped 6.9 per cent year-on- year to 11.53 trillion yuan (USD 1.89 trillion) in the first six months of 2015, slipping further from a 6-per cent dip in the first quarter adding to China’s worries over the slowdown. During the first half, industrial output grew 6.3 per cent year-on-year and fixed-asset investment climbed 11.4 per cent.
Property investment grew 4.6 per cent year-on-year, while retail sales of consumer goods rose 10.4 per cent. Industrial output in China grew 6.3 per cent year-on-year in the first half (H1) of 2015, slightly down from a 6.4 per cent increase in the first quarter.
Investment in China’s property sector rose 4.6 per cent year-on-year to 4.4 trillion yuan (USD 708.8 billion) in the first half of 2015, the NBS said projecting a positive trend of real estate market whose slowdown has raised concerns of a bubble.
Also China’s fixed-asset investment grew 11.4 per cent year-on-year in the first half of 2015, the NBS said. Frederic Neumann, co-head of Asian economic research at HSBC expects more fiscal and monetary easing in the coming months in order for China to achieve sustainable growth.
“Stimulus measures rolled out over the past nine months are beginning to show some traction. But work remains to be done,” he told the BBC.
The 7 per cent GDP in the second quarter which is the target announced by Premier Li Keqiang is a bit of surprise in the backdrop of steady projections of downturn in China’s economy.
Last week the International Monetary Fund (IMF) maintained its forecast of 6.8 per cent for China’s economic growth this year while ruling out any negative impact due to the recent stock market turmoil.
In its World Economic Outlook Updated, the IMF forecast the Chinese economy to grow 6.3 per cent in 2016 and 6 percent for 2017.
“In constructing forecasts for China, our assumption continues to be that the Chinese authorities will indeed allow a moderate slowdown of growth, while also using monetary and fiscal policies if needed to prevent too sharp a slowdown,” Olivier Blanchard, IMF economic counselor and director of research department said in Washington.
He said the recent stock market crash wiping out USD 3.2 trillion capital will have little effect on the world’s second-largest economy. “The bubble has burst… And that’s potentially worrisome,” he said.
“How worrisome is it? We don’t think very much,” he said, explaining that the capitalisation of the Chinese stock market in the GDP is much smaller than in countries such as the US, therefore less effect on the overall economy.
“My sense is that Chinese people should be used to the wild gyration of the stock market. This is not the first one. It may not be the last one. So, I think it’s very much a sideshow,” he said.
