China posted better-than-expected second-quarter gross domestic product (GDP) figures, but economists say there’s little evidence of progress in rebalancing its economic growth model towards domestic consumption.
GDP growth picked up to 7.5 percent on year in the June-April quarter, from 7.4 percent in the previous three months, as Beijing’s targeted stimulus measures began to pay off.
“The recovery is clear, but this recovery can’t be seen at the consumer level, it’s driven by infrastructure spending that the government has planned. That’s troubling,” Dariusz Kowalczyk, senior economist/strategist, Asia ex-Japan at Credit Agricole told CNBC on Wednesday.
In April, the government rolled out a mini stimulus package designed to boost spending on infrastructure including railways and social housing. As a result, fixed asset investment climbed 17.3 percent in the first six months of 2014 compared with a year earlier, while retail sales rose just 12.4 percent in June from a year ago, in line with analysts’ predictions.
“The gap between investment and consumption remains very wide. Retail sales need to pick up to a pace that equals fixed asset investment, otherwise growth will continue to be imbalanced,” he said.
This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.