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China growth picks up on stimulus hike

The economy grew 7.5 per cent in April-June from a year earlier, just ahead of a median forecast of 7.4 per cent.

China’s economic growth picked up slightly in the second quarter as a burst of government stimulus paid dividends, but analysts said Beijing will likely need to offer more support to meet its annual growth target as the property market slows.

Analysts remain cautious about the economic outlook, noting that the pick-up in growth was driven more by government support than a natural recovery in momentum, as evidenced by a surprising surge in lending by state-controlled banks in June.

Many believe the slowing property sector poses the biggest risk to the economy in the second half of the year, and thus could dictate whether Beijing sticks to a steady rollout of modest stimulus steps or considers more aggressive action such as interest rate cuts. “The recovery is quite dependent on government support. So I think the government can choose either to tolerate lower growth or to do more stimulus to achieve their growth target,” said Chang Jian, an analyst at Barclays Capital in Hong Kong.

The economy grew 7.5 per cent in April-June from a year earlier, the statistics bureau said on Wednesday, just ahead of a median forecast of 7.4 per cent.

A raft of support measures helped lift the pace from an 18-month low of 7.4 per cent in the first quarter, with infrastructure investment and related manufacturing offsetting the drag from weak exports and the cooling property market.

Stimulus measures have included sharply higher bank lending, reducing the amount of cash some banks have to hold as reserves, instructing regional governments to quicken their spending and hastening the construction of railways and public housing.

The property sector continues to drag on growth, even though Reuters calculations showed home sales by value picked up sharply in June as state-controlled banks made credit more easily available.

Real estate investment, which affects more than 40 other sectors, rose 14.1 per cent in the first half of 2014 from the same period a year ago, down from an annual rise of 14.7 per cent in the first five months.