Wednesday, July 16, 2014

CHINA ECONOMIC GROWTH

From South China Morning Post--

China’s economic growth quickens to 7.5pc in Q2 as policy effect plays out

Update
China’s economy expanded faster in the second quarter of this year, indicating the government’s mini-stimulus policies have taken effect, though cooling property investment is posing downside risks in the months ahead.

China’s economy expanded faster in the second quarter of this year, indicating the government’s mini-stimulus policies have taken effect, though cooling property investment is posing downside risks in the months ahead.
Gross domestic product grew 7.5 per cent in the second quarter, quickening from 7.4 per cent in the first three months, which was an 18-month low, the National Bureau of Statistics said.
The pace was on par with the official target of about 7.5 per cent growth for this year, and in line with expectations after Premier Li Keqiang said recently that the economy was doing better in the second quarter than the previous three months.
Beijing would need to roll out more easing steps to ensure the annual growth target is met, analysts said, with some maintaining the urge for the government to lower reserve requirement ratio for more banks.
The acceleration came after Beijing’s pro-growth policies rolled out in recent months, when some banks’ reserve requirement ratio was lowered and the way of calculating the ratio of loans in deposits was revised to release more liquidity to the market, while infrastructure investment was quickened and taxes for small businesses were trimmed.
“The result was slightly better than my expectation. The acceleration was a result of relatively significant policy easing in May and June after growth eased further in April. Such a performance could give the government some reason to cheer up and keep policy stable for a while,” said Shen Jianguang, Mizuho Securities chief economist for Greater China.
However, Shen said recent remarks by government officials showed they were still worrying about a slowdown, which might be due to persistent risks from the property sector.
“We’ll see whether housing starts will slip further, or stabilise. The effectiveness of the recent wave of local housing policy relaxation remains uncertain,” he added.
Fixed-asset investment in the first half rose 17.3 per cent from a year earlier, slower than the gain of 17.6 per cent in the first quarter.
Property investment growth cooled to 14.1 per cent in the first half from a year earlier, down from 16.8 per cent in the January-March period.
Industrial production grew 9.2 per cent in June from the same period last year, faster than the 8.8 per cent in May. Retail sales rose 12.4 per cent, compared with 12.5 per cent in May.
Retail sales rose 12.4 per cent year on year in June, a tad slower than the 12.5 per cent growth in May.
Despite the faster economic expansion, economists cautioned that Beijing will face challenges in defending its annual growth target.
“Looking ahead, as China’s structural property downshift continues to unfold, we expect the consequent negative drag on the economy to increase” in the fourth quarter this year and into next year, said UBS Securities’ economist Wang Tao.
Wang said China still has a lot of room for further investment in infrastructure such as railways, subway trains, water, clean energy and environmental projects, but space might be limited for increased spending on roads, highways, ports, and power generation.