BEIJING — China’s economy posted better-than-expected growth of 7 percent in the second quarter of 2015, as the filtering through of the government’s pro-growth policies and reform measures pave way for steady improvement in the latter half of the year.
Second-quarter GDP expanded 7 percent year on year, unchanged from the first quarter. It grew 1.7 percent over the previous quarter, the National Bureau of Statistics (NBS) announced on July 15.
The growth beat a median market forecast of 6.9 percent for the second quarter, as authorities cited “positive signs” in the economy.
The growth rate follows the government’s bold moves in macro-control and adherence to structural reforms as the economy plateaus, NBS spokesperson Sheng Laiyun said at a press conference.
“Policies rolled out by central authorities to stabilize growth, boost reforms and restructuring, improve livelihoods and prevent risks have played significant roles for the economy,” Sheng said.
These measures included three cuts in both benchmark interest rates and banks’ reserve requirement ratio (RRR) in the first half, and the government’s accelerated fiscal spending on infrastructure to shore up investment.
With these efforts, the national economy has stayed “in the proper range” in the first half as major economic indicators gradually recovered, indicating stabilization and improvement, Sheng said, citing steady employment and price levels.
More than seven million new jobs were created in urban areas in the first half, with a target of 10 million for the year, while inflation rose only 1.3 percent during the period.
During the same period, industrial output grew 6.3 percent year on year and fixed-asset investment climbed 11.4 percent. Property investment grew 4.6 percent, while retail sales of consumer goods rose 10.4 percent.
In the first half of the year, the nation’s GDP hit 29.7 trillion yuan ($4.9 trillion), up 7 percent year on year.
MORE BALANCED GROWTH
Zhu Zhenxin, an analyst with Minsheng Securities, said the services sector became a main economic driver, growing 8.4 percent in the first half, outpacing general GDP growth.
The sector accounted for 49.5 percent of the GDP in the first half, up 2.1 percentage points compared to the same period last year. Sheng said this suggested a continuing transition of China’s economic structure that used to be dominated by secondary industry.
Consumption also played a bigger role in boosting growth as it contributed 60 percent to first-half GDP growth, up 5.7 percentage points compared to the same period last year, Sheng said.
As the government seeks to create an easier environment for business by simplifying administrative approval procedures, private businesses have boomed. Industrial output in the country’s privately-owned sector expanded 8.1 percent in the first half while private investment grew 11.4 percent year on year, accounting for 65.1 percent of the total.
During the press conference on July 15, Sheng said that a national plan to coordinate development in the north, including capital Beijing and neighboring Tianjin municipality and Hebei province, will add growth momentum to the economy as it will further boost industrial and urban development.
Beijing’s transport director announced plans on July 13 to build a 1,000-km suburban rail network providing better access to neighboring cities.
Sheng said the country’s Internet Plus action plan, which seeks to ignite innovation in various industries from consumption to manufacturing and finance, is certain to accelerate structural changes and industrial upgrades.
Speaking during a meeting with economists and entrepreneurs on July 10, Premier Li Keqiang said China’s economy still boasts “remarkable tenacity, potential and flexibility”. He said China’s potential for medium-high growth remains underpinned by strong, long-term fundamentals.
BETTER PERFORMANCE EXPECTED
Economists are upbeat about the economic outlook and believe the government’s full-year growth target, set at around 7 percent for 2015, is attainable despite growing concerns about recent volatility in the stock market.
Steven Zhang, an analyst from Morgan Stanley Huaxin, said the stock market rout will have limited negative impact on the real economy due to bold regulatory measures that prevented risks from spreading to sectors including real estate while the bubble is still controllable.
UBS said in an earlier report that it does not anticipate the stock market rout will lead to systemic financial problems in China, with only a limited impact on the real economy.
After years of slowdown, it is widely anticipated that the much-pressured economy will finally bottom out and regain momentum during the rest of the year.
“We think economic growth in the latter half will most likely outperform that in the first half,” Sheng said, forecasting that government pro-growth policies in the first half will have more of an effect later this year.
The spokesperson cited signs of warming in sales and investment in the property market and noted that major construction projects approved in the first half will start operation.
Official data also showed factory activity has remained in expansion territory for four consecutive months, and June’s exports reversed a three-month losing streak by rising 2.1 percent from a year earlier.
Andrew Colquhoun, head of Asia-Pacific sovereigns at Fitch Ratings, said he expects a further sequential pick-up in the second half following recent monetary and credit policy easing.
Lian Ping, chief economist with Bank of Communications, forecast a stronger second half will bring the full year growth rate to 7.1 percent on recovering exports and stronger domestic consumption. HSBC economists agreed.
More easing measures from the government could be expected amid signs of stabilization in the economy.
“In order to strengthen and sustain the recovery, more policy easing measures are still needed and likely in the second half. We forecast another 25 basis points of policy rate cut and 200 basis points reserve ratio cut,” a report of HSBC said on July 15.
Despite optimism from the latest data, Sheng cautioned more needs to be done to ensure solid stabilization of the economy by strictly implementing the government’s policies.