China Q2 GDP at 7%

China’s economy grew an annual 7 percent in the second quarter, steady with the previous quarter and slightly better than analysts’ forecasts, though further stimulus is still expected after the quarter ended with a stock market crash.  Monthly activity data, released alongside the GDP report, also beat expectations across the board to show signs of a rebound, with factory output hitting a five-month high, following reports of increased bank lending on Tuesday.

It has been a difficult year for the world’s second-largest economy. Slowing growth in trade, investment and domestic demand has been compounded by a cooling property sector, deflationary pressure, and the recent equity market panic, so signs of improvement may help buttress faltering investor confidence in the effectiveness of Beijing’s management.  Beijing will still need to provide liquidity to buttress its still-rickety stock exchanges – which the statistics bureau described as key to economic stability – and to reduce the cost of corporate financing, which remains far higher than returns on investment for many companies.

Economists have also called for more direct fiscal stimulus to help support local governments as they grapple with a mountain of debt.  Fiscal expenditure rose 13.9 percent on an annual basis in June, a sharp rise from May’s low 2.6 percent but well below April’s 33.2 percent spike.


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