China GDP grows 6.7% in second quarter

Posted on July 15, 2016

A worker walks inside a construction site in Beijing on July 13, 2016. China's growth slipped to a new seven-year low of 6.6 percent in the second quarter, according to a survey of economists by AFP, despite government efforts to spur activity in the world's second-largest economy. / AFP PHOTO / NICOLAS ASFOURINICOLAS ASFOURI/AFP/Getty Images©AFP

China’s economy grew 6.7 per cent in the second quarter, unchanged from the previous three-month period, as a buoyant property market and government spending on infrastructure softened the blow from a slowdown in manufacturing. 

The latest quarterly real growth figure is slightly ahead of the 6.6 per cent pace that economists expected, according to a Reuters poll. China’s legislature approved a full-year growth target of 6.5 to 7 per cent for 2016. China’s economy grew 6.9 per cent in 2015.

    China’s industrial economy, which is suffering from rampant overcapacity and deflation, remained a drag on growth, but less so than in the first quarter, Value added from industrial sectors — which include manufacturing, construction, mining, and power generation — grew at a 6.1 per cent annual pace in the first half, up from 5.8 per cent growth in the first quarter.

    Services remained the biggest growth driver, growing 7.5 per cent in the first half, down slightly from 7.6 per cent in the first quarter. Retail sales were another bright spot, growing. 10.6 per cent in June from a year earlier, the fastest pace since December and well ahead of expectations of 10 per cent.

    Manufacturers have cut spending on new factories, leading to slowdown in investment by privately-owned companies. But a surge in infrastructure investment by state-owned enterprises has taken up the slack, supporting demand for commodities such as steel, copper and cement. 

    Global investors remain broadly pessimistic about China, which is in the midst of a wrenching transition from a growth model based on construction and heavy industry towards greater reliance on consumption and services. But fear of a hard landing and spillovers to the global economy have eased since falls in China’s stock market and currency sent global markets into a tailspin in January.

    The renminbi weakened 3 per cent in the second quarter, its second-worst three-month run to-date. But unlike in January, investors have reacted with indifference. China’s main stock index was trading just shy of the three-month high touched on Wednesday.

    But other indicators also released on Friday showed that downward pressure on the economy remains significant. Fixed-asset investment — which includes both infrastructure and manufacturing investment — grew at 9.0 per cent, its slowest pace since 2000 in the first six months and down sharply from 9.6 per cent in the year to May. 

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