Further government stimulus is likely to be needed to meet growth target for 2014 of at least 7.5%
Glass factory in Zhuzhou, central China's Hunan province on a quarterly basis, growth picked up to 2% from a revised 1.5% in the first quarter. Photograph STR/AFP/Getty Images
China's economy grew slightly faster than expected in the second quarter as a burst of government stimulus paid dividends.
The world's second-largest economy grew 7.5% in April-June from a year earlier, the government statistics bureau said on Wednesday, just ahead of economists’ forecasts.
But despite China introducing a series of stimulus measures this year, analysts said further support was likely to be needed to meet the government's growth target for 2014 of at least 7.5%.
"The recovery is quite dependent on government support. So I think the government can choose either to tolerate lower growth, or to achieve the growth target they just have to do more stimulus," said Chang Jian, an analyst at Barclays Capital in Hong Kong.
The uncertainty was reflected in stockmarkets across Asia where the reaction was muted. The Nikkei index slipped slightly by 0.015, while in Australia the ASX200 was also down 0.11% to 5,505.
An unexpectedly hefty increase in bank loans in June had been taken as a signal of Beijing's alarm at the slowdown, and how far it is prepared to go to get growth back on track to meet its target.
On a quarterly basis, growth picked up to 2% from a revised 1.5% in the first quarter, better than market expectations and consistent with premier Li Keqiang's comment last week that growth had quickened in April-June.
"This is probably short-term stabilisation due to policy support," said Wang Jin, an analyst at Guotai Junan Securities in Shanghai. "There could be more policy stimulus going forward, and we might see an interest rate cut. The biggest risk is a retreat in the economic growth rate, especially softening in the property market."
In recent months the government has rolled out a series of targeted measures, including steps to reduce the amount of cash that some banks have to hold as reserves, instructing regional governments to quicken their spending, and hastening the construction of railways and public housing.
Li vowed recently that the economy would grow by at least 7.5% in 2014, surprising many market watchers after a weak start to the year, and reinforcing expectations of more government assistance to come.
The Beijing leadership has ruled out any huge stimulus as China struggles to deal with piles of local government debt, the hangover from a 4tn yuan ($644bn) spending package implemented in 2008-09 to help cushion the country from the global financial crisis.
Source - http//www.theguardian.com/world/2014/jul/16/chinas-economy-grows-75-in-second-quarter-slightly-faster-than-expected