Tue, Jul 18, 2017 - Page 10 News List

China posts stable 6.9% growth in Q2

UNCERTAINTY:A government crackdown on financial risks has slowed credit growth, which would weigh on the economy in the second half of the year, analysts said


People spend time at a cafe with its windows reflecting a fashion advertisement billboard at a shopping mall in Beijing yesterday.

Photo: AP

China yesterday reported better-than-expected growth in the second quarter, but analysts said the momentum might not last as authorities clamp down on rising debt.

The Chinese economy expanded 6.9 percent last quarter, the same as the previous three months and better than the 6.8 percent tipped in an Agence France-Presse survey.

“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,” Chinese National Bureau of Statistics spokesman Xing Zhihong (邢志宏) said.

“However, we must be aware that there are still many unstable and uncertain factors abroad and long-term structural contradictions remain prominent at home,” Xing told reporters.

Industrial production grew 7.6 percent last month, while retail sales were up 11 percent, both better than the previous month, according to the official data.

However, analysts expect a deceleration of the overall economy.

“China’s strong first half to the year won’t last,” Capital Economics China economist Julian Evans-Pritchard said in a note.

“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,” he said.

Debt-fueled investment in infrastructure and real estate has underpinned China’s growth for years, but Beijing has launched a crackdown over fears of a potential financial crisis.

Fitch Ratings on Friday maintained its “A-plus” country rating for China, but said its growing debt could trigger “economic and financial shocks.”

The statement followed Moody’s decision in May to downgrade China for the first time in almost three decades on concerns over its ballooning credit and slowing growth.

Chinese President Xi Jinping (習近平) called for tougher regulations to crack down on financial risks during a weekend National Financial Work Conference, which sets the tone for reforms, state media said.

The government will continue to deleverage the economy through prudent monetary policy and by reducing leverage in state-owned enterprises, Xi said.

The conference showed that authorities will intensify financial regulation “unprecedentedly, through a much more centralized and empowered organizational set-up,” Australia and New Zealand Banking Group China economist Raymond Yeung (楊宇霆) said in a note.

“Debt reduction will become an important consideration in monetary policy,” Yeung said, predicting more corporate defaults and a tightening of credit policy among banks.

Despite the economic deleveraging, however, “we do not think this event will trigger an immediate monetary tightening,” he said.

Analysts expect tighter restrictions on property purchases and bank lending will continue to weigh on the economy in the months ahead, but a sharp slowdown in the second half is unlikely as policymakers prepare for an important Chinese Communist Party congress later this year that will likely cement Xi’s place as the most powerful leader in a generation.

“It is therefore highly probable that authorities will use the resources and policy tools at their disposal to ensure a positive economic outcome,” Citibank said in a note.

The government has trimmed its growth target for this year to about 6.5 percent, after it expanded 6.7 percent last year — its slowest rate in more than a quarter of a century.

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