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China’s economy stabilizes as consumer spending perks up

Updated: Jul 15,2016 12:45 PM     Bloomberg

China’s economy stabilized in the second quarter as lending and consumer spending perked up in June, suggesting the world’s second-largest economy is responding to stepped up monetary and fiscal policy support.

Gross domestic product rose 6.7 percent in the second quarter from a year earlier, compared with a projection of 6.6 percent by economists Bloomberg surveyed and in line with the government’s growth target of at least 6.5 percent for the full year. Industrial output and retail data for June beat estimates, investment slowed, and a separate report from the central bank showed the broadest measure of new lending beat all 29 analyst forecasts.

A credit surge early this year has been a prop to growth even as it also raises questions about the sustainability of the expansion. Policy makers have kept benchmark interest rates at a record low since October as they balance their growth objective with efforts to curb debt risks and reduce excess capacity.

“China hasn’t collapsed,” Bill Adams, a senior international economist at PNC Financial Services Group in Pittsburgh, wrote in a recent note. “While its economy continues to face daunting challenges in the transition away from export- and investment-led growth, the doomsday predictions for the Chinese economy look like stopped clocks.”