China’s GDP Grew by 7% But Questions Remain

Gross domestic product expanded by 7% in the second quarter, compared to the same period last year, according to data released Wednesday by China’s National Bureau of Statistics.

While the growth rate is slightly faster than the 6.9% figure expected by economists, it matches the 7% GDP growth rate from the first quarter, as well as Beijing’s growth target for the full year.

Markets dropped in China after the numbers came out — stocks lost 3% in Shanghai and 4.2% in Shenzhen.
There’s no question about it: After years of breakneck growth, China’s economy, the world’s second-largest, is now slumping. Economists expect to see 6.95% annual GDP growth this year, and even slower expansion at 6.5% in 2016, according to a CNNMoney survey.

“We do anticipate that Beijing will stay on the accommodative track for monetary and fiscal policies, despite improved growth prospects,” wrote Credit Suisse’s Dong Tao in a research note.

China’s central government has already cut interest rates three times this year — most recently, just two weeks ago. Experts say the rate cut came earlier than expected, likely as a defense against a worrying stock market plunge over recent weeks.

Another rate cut is expected in the second half of the year, along with a reduction in the amount of cash that banks are required to keep on reserve.

via CNN

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza