Chinese Q2 growth shows hard landing fears overdone

Boosted from tax breaks for small businesses and government investment in rail networks and public housing construction

Residential construction  in  Guangzhou, Guangdong Province: new home prices in China’s four major cities are on the rise. Photograph: Brent Lewin/Bloomberg

Residential construction in Guangzhou, Guangdong Province: new home prices in China’s four major cities are on the rise. Photograph: Brent Lewin/Bloomberg

Tue, Jul 22, 2014, 01:05

One piece of news sure to be welcomed by the BRICS countries is news that China’s economy seems to be expanding at a faster rate than before, and was running at around the government target of 7.5 per cent year-on-year in the second quarter.

The rise from 7.4 per cent in the first quarter was slightly ahead of expectations, and will do much to counter concerns about China facing a hard landing after the slower growth picture at the start of the year.

The economy was boosted by tax breaks for small businesses and government investment in rail networks and public housing construction.

Sheng Laiyun, a spokesman for the National Bureau of Statistics, said stable inflation, jobs and income data meant “China’s economic growth is stable and is within a reasonable range”.

Premier Li Keqiang told China’s cabinet, the State Council, that China “must accomplish its major economic and social development targets”, and reform would become one of the major forces driving that development.

Vindicated

Julian Evans-Pritchard at Capital Economics believes the second quarter growth picture will have left policy-makers feeling vindicated in their decision not to pursue more forceful stimulus.

“Data also released today showed that growth in industrial production edged up from 8.8 per cent year-on-year to 9.2 per cent last month, with the pick-up concentrated in the state sector,” said Evans-Pritchard.

“There is always a degree of scepticism about the accuracy of these headline figures. Our China Activity Proxy (CAP) suggests that the current pace of growth is slower but points to a similar trajectory.”

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