China GDP Growth Slightly Beats Estimates In Q2


The Chinese economy advanced 6.9 percent year-on-year in the second quarter of 2017, the same pace as in the previous period while markets expected a 6.8 percent expansion. Growth remained at its strongest level since the third quarter of 2015, as industrial output and retail sales picked up while fixed-asset investment remained strong. For 2017, the Chinese government expects the economy to grow by around 6.5 percent, slightly lower than last year's 26-year low of 6.7 percent.

In June, industrial production increased by 7.6 percent year-on-year, faster than a 6.5 percent rise in the prior period and beating expectations of a 6.5 percent gain. It was the steepest increase in industrial production since March, as output expanded at a faster pace for: Manufacturing (8.0 percent from 6.9 percent in the prior month) and electricity, gas and water production (7.3 percent from 6.4 percent). In contrast, mining production fell 0.1 percent after a decline of 0.5 percent in May. 

Retail sales rose 11.0 percent from a year earlier, following a 10.7 percent increase in May and above consensus of a 10.6 percent gain. It was the sharpest increase in retail sales since December 2015, as sales surged for telecoms (18.5 percent from 1.9 percent in May). Also, sales went up at a faster pace for: Automobiles (9.8 percent from 7.0 percent in May), building materials (15.2 percent from 11.0 percent), furniture (14.8 percent from 13.5 percent), office supplies (16.4 percent from 5.0 percent), cosmetics (17.0 percent from 12.9 percent) and personal care (11.2 percent from 8.7 percent).

Non-farm fixed asset investment rose 8.6 percent year-on-year to 280,605 CNY billion, also above market expectations of a 8.5 percent increase.

From January to June 2017, government spending rose 15.8 percent compared to the same period the prior year. At the same time, fiscal revenue increased by 9.8 percent. In June only, fiscal expenditure jumped 19.1 percent year-on-year, much faster than a 9.2 percent rise in May. The pick-up in fiscal spending was mainly due to faster funding allocation to guarantee the key expenditure needs under a drive to make fiscal policy more active and effective. Meantime, China's fiscal revenue went up 8.9 percent, following a 3.7 percent growth in a month earlier. 

Figures released earlier showed exports increased by 11.3 percent year-on-year to USD 196.6 billion, faster than an 8.7 percent rise in the prior month and beating estimates of an 8.7 percent growth. It was the fourth straight month of increase in exports, reaching the highest value so far this year, supported by firmer global demand. Inbound shipments rose 17.2 percent to USD 153.8 billion, after a 14.8 percent rise a month earlier and higher than market consensus of a 13.1 percent rise.

Considering the first half of 2017, final consumption accounted for 63.4 percent of the Chinese GDP growth. Meanwhile, investment contributed with 32.7 percent of growth and net exports accounted for 3.9 percent.

For 2017, the Chinese government expects the economy to grow by around 6.5 percent, slightly below last year's 26-year low of 6.7 percent. While officials have vowed to push ahead with reforms, the central bank has shifted to a modest tightening bias at the start of 2017, guiding market interest rate higher during Q1. Regarding property sectors, Beijing is trying to rein in debt and a housing bubble with tough measures.

On a quarterly basis, the economy advanced 1.7 percent quarter-on-quarter in the second quarter of 2017, faster than a 1.3 percent expansion in the previous period and matching market expectations.

National Bureau of Statistics l Rida Husna | rida@tradingeconomics.com
7/17/2017 8:10:46 AM