China Q2 economic growth picks up as stimulus pays off

Written by Reuters | Beijing | Updated: Jul 17 2014, 06:42am hrs
Chinas economic growth picked up slightly in the second quarter as a burst of government stimulus paid dividends, but analysts said Beijing will likely need to offer more support to meet its annual growth target as the property market slows.

Analysts remain cautious about the economic outlook, noting that the pick-up in growth was driven more by government support than a natural recovery in momentum, as evidenced by a surprising surge in lending by state-controlled banks in June.

Many believe the slowing property sector poses the biggest risk to the economy in the second half of the year, and thus could dictate whether Beijing sticks to a steady rollout of modest stimulus steps or considers more aggressive action such as interest rate cuts.

The recovery is quite dependent on government support. So I think the government can choose either to tolerate lower growth or to do more stimulus to achieve their growth target," said Chang Jian, an analyst at Barclays Capital in Hong Kong. The biggest risk (to the economy) for the second half is a property correction and related financial risks.

The economy grew 7.5% in April-June from a year earlier, the statistics bureau said on Wednesday, just ahead of a median forecast of 7.4% in a Reuters poll.

A raft of support measures helped lift the pace from an 18-month low of 7.4% in the first quarter, with infrastructure investment and related manufacturing offsetting the drag from weak exports and the cooling

property market.