China economic growth picks up as stimulus pays off

China’s economy grew slightly faster than expected in the second quarter as a burst of government stimulus paid dividends, but analysts said further support was likely to be needed to meet the government’s growth target for 2014.

The world’s second-largest economy grew 7.5 per cent in April-June from a year earlier, the government statistics bureau said on Wednesday, just ahead of a median forecast of 7.4 per cent in a Reuters poll.

A raft of stimulus measures has helped lift the pace of growth slightly from an 18-month low of 7.4 per cent in the first quarter.

An unexpectedly hefty increase in bank loans in June had been taken as a signal of Beijing’s alarm at the slowdown, and how far it is prepared to go to get growth back on track to meet its target of 7.5 per cent this year.

On a quarterly basis, the National Bureau of Statistics said growth picked up to 2 per cent from a revised 1.5 per cent in the first quarter, better than market expectations and consistent with premier Li Keqiang’s comment last week that growth had quickened in April-June.

In recent months the government has rolled out a series of targeted measures, including steps to reduce the amount of cash that some banks have to hold as reserves, instructing regional governments to quicken their spending, and hastening the construction of railways and public housing.

Mr Li vowed recently that the economy would grow by at least 7.5 per cent in 2014, surprising many market watchers after a weak start to the year and reinforcing expectations of more government assistance to come.

Top leaders have ruled out any massive stimulus as China struggles to deal with piles of local government debt, the hangover from a 4 trillion yuan ($644 billion) spending package implemented in 2008-09 to help cushion the country from the global financial crisis.

Reuters