Financial analysts believe China’s economy will slow later this year as Beijing moves to deflate the country’s credit bubble and achieve sustainable growth.
The world’s second-largest economy served up gross domestic product (GDP) growth of 6.9% in the second quarter of the year, according to official figures.
It matched the performance seen between January and March – beating the expectations of many economists.
The annual growth rate was driven by a 7.6% jump in industrial production, while retail sales were up 11%.- the largest increase since December 2015.
National statistics bureau spokesman, Xing Zhihong, said.”The national economy has maintained the momentum of steady and sound development in the first half of 2017, laying a solid foundation for achieving the annual target and better performance.
Image: China’s economy remains reliant on its manufacturing industry
“However, we must be aware that there are still many unstable and uncertain factors abroad and long-term structural contradictions remain prominent at home.”
The Chinese authorities are targeting growth of around 6.5% this year, slightly lower than last year’s actual 6.7% which was the weakest in 26 years.
That is mostly a consequence of its efforts to reduce debt. While the country’s debt stands at 277% of GDP, it has introduced tighter lending restrictions on banks to help rein in consumer debt and soaring house prices.
President Xi Jinping has called for even tougher regulations to reduce the country’s vulnerability though the GDP figures suggested there was no cause for immediate alarm – given stronger export growth and a jump in new orders.
Fitch Ratings on Friday maintained its A-plus rating for the country but said its growing debt could trigger “economic and financial shocks”.
Image: President Xi Jinping wants further tools to reduce the risk to the economy from soaring debt
Julian Evans-Pritchard, an economist at Capital Economics, said: “China’s strong first half to the year won’t last.
“The recent crackdown on financial risks has driven a slowdown in credit growth, which will weigh on the economy during the second half of this year.”
AJ Bell investment director Russ Mould believes the GDP figures are of some comfort.
He said: “Boosted by both fiscal and monetary stimulus in 2016, China remains on track to meet the 6.5% to 7.0% economic growth target laid down by the ruling Communist Party.
“Moreover, its currency, the renminbi, has rallied against the dollar… to confound those who were convinced that a devaluation was imminent.
“Both the economy and the currency should help to ease investors’ fears that China is going to the source of a further growth and financial market fright, after the volatility such worries caused in August 2015 and early 2016.”