China GDP growth surprises on the upside

Added 17th July 2017

China pulled out better than anticipated growth over the second quarter, leading analysts to speculate it could have greater momentum moving forward.

China GDP growth surprises on the upside

During the second quarter of 2017, the Chinese economy grew by 6.9% year-on-year to about 38.2trn yuan ($5.6trn), beating analysts’ prediction by 0.1%.

Though year-on-year growth was flat with the first quarter, the reading was comfortably above the government’s annual target of 6.5%, leading commentators to predict China could see its first annual acceleration since 2010.

The update from the National Bureau of Statistics likewise pointed to higher retail sales growth of 10.4%, up from 10% in the first quarter, and a healthier stream of private sector investment, up 7.2% to 17trn yuan.

While fixed asset investment saw strong growth year-on-year of 8.6%, it was 0.6% lower from Q1.   

However, instead of being bolstered by the encouraging signs of growth, China’s stock markets remained rattled and bemused by the piece of good fortune.  

The Shanghai Composite Index, which had dipped by as much as 2.6% prior to the release of the Q2 GDP figures, fell sharply shortly after Asia’s markets opened on Monday. 

By the late afternoon, however, it had recovered somewhat and was just 1.43% below the previous close at 3,176.5.

Still, the fact that China's Q2 GDP data was stronger than expected "suggests that the economy is maintaining momentum," said Investec Wealth & Investment bond strategist Shilen Shah. 

“Despite concerns over China’s so-called shadow banking system, the global economic recovery seems to have supported Q2 GDP,” Shah reflected.

Although “retail sales were somewhat stronger,” he noted that the “underlying data suggests that external demand and capex remain the key drivers of growth”.

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