China records surprising second-quarter GDP growth

China’s economy grew 6.7% in the second quarter, beating expectations. Analysts polled by Reuters had predicted it to dip to 6.6%.

This growth rate is likely to ease the pressure on Beijing to enforce more immediate stimulus measures, which has proved increasingly ineffective in reversing downward momentum.

“Growth has stabilised, and we also see that the structure is improving. Investment growth is coming down, which is a correction for the over-investment of the past seven years,” said Zhu Haibin, Chief China Economist at JPMorgan in Hong Kong [1].

“China’s economic growth will likely face increased downward pressure,” said HSBC economist Ma Xiaoping. “Growth lacks momentum and relies on the government’s stimulus measures” [2].

China’s economy is in the midst of gradual transition to consumption and services from a growth model based on construction and heavy industry. But the transformation hasn’t been all smooth sailing, as Beijing logged the slowest growth percentage in 25 years in 2015.

Chinese Premier, Li Keqiang, said this week that the Chinese economy was “basically stable” [2]. In order to stimulate growth, China has increased its expenditure on infrastructure expenditure and reduced corporate taxes. The Finance Ministry reported on Friday that government spending rose 19.9% year over year in June, compared with a 17.6% increase in May [3].

[1] – China GDP grows 6.7% in second quarter on boost from infrastructure – Financial Times
[2] – China Q2 economic growth beats estimates as stimulus shores up demand – CNBC
[3] – Massive Stimulus Keeps China GDP Steady in Second Quarter – The Wall Street Journal