Strong Q2 growth eases way for reforms in China

Apartment blocks in Shandong province. While growth in China's high-flying property sector has cooled this year, a rebound in exports has helped prevent a broader slowdown in the country's economy.
Apartment blocks in Shandong province. While growth in China's high-flying property sector has cooled this year, a rebound in exports has helped prevent a broader slowdown in the country's economy.PHOTO: AGENCE FRANCE-PRESSE

Policymakers get room to tackle economic challenges ahead of autumn party congress

BEIJING • China's economy expanded faster than expected in the second quarter, setting the country on course to comfortably meet its 2017 growth target and giving policymakers room to tackle big economic challenges ahead of key leadership changes later this year.

The boost to growth was in part driven by firmer exports and production, in particular steel, which could heighten trade tensions as both the United States and China begin economic talks this week.

China's gross domestic product (GDP) rose 6.9 per cent in the second quarter from a year earlier, the same rate as in the first quarter, the National Bureau of Statistics said yesterday.

Economic data from the second quarter has prompted a number of analysts to upgrade their GDP forecasts for China for 2017, although some moderation in growth is expected later this year as policymakers' efforts to rein in property and debt risks weigh on activity.

"In general, we expect GDP growth to remain robust in the second half but slower than in the first half, due to the high base," Citi economists said in a research note. "Looking ahead, uncertainty remains on investment and trade."

The robust data briefly helped China's major stock indexes recoup earlier losses, before retreating later in the session.

The second-quarter numbers put the economy on a strong footing to meet China's growth target of around 6.5 per cent this year, which would give policymakers room to defuse financial risks.

  • 6.9%


    Rise in China's gross domestic product in the second quarter, from a year earlier.

While growth in the high-flying property sector has cooled this year, a rebound in exports after several years of decline has helped prevent any broader slowdown in China's economy.

Retail spending and factory output were also bright spots in the first half.

Retail sales growth picked up to 10.8 per cent in the second quarter from 10.0 per cent in the first quarter, a Reuters calculation based on official data shows.

Factory output also picked up in the second quarter, though the 6.9 per cent growth for the first half was only a slight pick-up from recent quarters.

The improving economy is no doubt welcome news ahead of a reshuffle of the top ranks of government at an autumn congress of the ruling Communist Party of China, with the leadership keen to ensure a smooth run-up to the meetings.

President Xi Jinping is widely expected to tighten his grip on power at the party congress, which could give him more clout to push through what analysts say are long overdue but painful reforms such as restructuring massive state firm debt.

REUTERS

A version of this article appeared in the print edition of The Straits Times on July 18, 2017, with the headline 'Strong Q2 growth eases way for reforms in China'. Print Edition | Subscribe