China growth rate holds steady at 6.7pc in second quarter

China’s economic growth rate held in the second quarter as stimulus efforts bolstered the slumping economy.

A Chinese worker assembles toy cars at a factory in China's Fujian province. Pic: AFP

Chinese growth held steady at 6.7 per cent in the second quarter, as record stimulus poured into the economy in the first quarter lent at least temporary stability to a slumping economy.

The growth report came in above forecasts after prior data had showed weaker manufacturing, exports and private investment. Today’s data were likely to ease pressure on Beijing to roll out more immediate stimulus measures, which have proven increasingly ineffective in reversing downward momentum.

A poll of 16 economists by The Wall Street Journal had predicted 6.6 per cent growth in China’s gross domestic product in the April-June period.

The National Bureau of Statistics also said that industrial output rose 6.2 per cent in June from a year earlier, accelerating from 6.0 per cent growth in May, while fixed-asset investment climbed 9.0 per cent year on year for the January-June period, compared with an increase of 9.6 per cent in the year’s first five months. Retail sales grew 10.6 per cent in June from a year earlier, accelerating from a 10 per cent increase in May. The industrial-production and retail figures were better than expected while the investment figure was below expectation.

In a bid to boost growth, China’s central bank has flushed funds through the financial system, ramped up infrastructure spending and reduced red tape and corporate taxes. The Finance Ministry reported that government spending rose 19.9 per cent year-over-year in June compared with a 17.6 per cent increase in May.

But that hadn’t appeared to be enough to counter a host of downdrafts hitting the world’s second-largest economy, raising the prospect that China could miss its annual growth target, set at 6.5 per cent to 7 per cent in 2016, for the third year in a row.

“This shows the economy is basically stable,” said Standard Chartered Bank Ltd. economist Ding Shuang. “The government is serious about achieving its growth target” for 2016 of 6.5 per cent to 7 per cent, he added.

Exports have dropped sharply in the face of slower global growth. Manufacturing has slumped, weighed down by overcapacity and rising debt. And a sharp drop in private investment has spurred Beijing to send out inspection teams and pressure banks to lend more to small companies, so far without much impact.

That has left many on the front lines feeling the pain.

Asiad Electronic Technology Co., a maker of phone chargers based in the manufacturing hub of Dongguan in southeastern China, said weak demand and too many competitors has forced the company to cut its staff to around 60 from over 200 last year.

“The market is saturated everywhere,” said Chen Weishan, the company’s founder, who said banks are reluctant to lend to smaller companies like Asiad. “Business is getting worse and worse,” he said.

In a bid to shift the economy from low-end manufacturing to consumption and services, China has sought to encourage new growth engines by rolling out innovation initiatives and promoting a Made in China 2025 program designed to automate and otherwise upgrade factory production.

But growth in these new areas — often spurred on by sizeable subsidies — hasn’t been fast enough to counter weakness in more traditional sectors, prompting Beijing to fall back on credit-fuelled infrastructure and overbuilt property to temper the downturn.

Beijing has announced plans to cut excess steel and coal production by around 10 per cent over the next few years amid accusations by foreign trading partners that it is selling steel and other products below cost in global markets.

But despite an earlier pledge to let the markets take a decisive role in the economy, restructuring has slowed to a crawl, economists say, as growth slips and unemployment rises, with progress likely to slow further in advance of a shuffle of leaders in China’s Communist Party top late next year.

“They don’t want to make any moves between now and 2017 while they play musical chairs,” said IHS Inc. economist Brian Jackson.

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