China looks set to hit its full-year growth target of 8 per cent after a surprisingly strong second quarter notable for a surge in investment driven by powerful fiscal and monetary stimulus.
Annual gross domestic product growth accelerated in the second quarter to 7.9 per cent from 6.1 per cent in the first quarter, making China the best-performing major economy and reinforcing hopes that the world economy is pulling out of its deepest recession in 80 years.
Economists had forecast 7.5 per cent growth, and several promptly responded to today's figures by raising their projections for this year and next.
"We see clear upside risks to our current GDP growth forecast of 8.3 per cent for 2009," said Yu Song and Helen Qiao at Goldman Sachs. They said the second quarter's 7.9 per cent growth translated into a 16.5 percent pace compared with the first quarter when expressed as a seasonally adjusted annualised rate.
A string of accompanying data for June from the National Bureau of Statistics depicted an economy successfully making up for a slump in exports through domestic demand, especially capital spending, generated by a 4 trillion yuan ($585 billion) pump-priming package and record bank lending.
Tokyo shares hit a one-week high and shares elsewhere in Asia powered to their highest level in a month as the Chinese data buoyed hopes for a global recovery.
Factory output growth quickened to 10.7 per cent in the year to June, beating forecasts, from May's 8.9 per cent reading, while investment in fixed assets in urban areas grew 33.6 per cent in the first half, up from 32.9 per cent in the first five months.
The lopsided nature of the economy was evident in a breakdown of the first-half GDP growth rate of 7.1 per cent.
Investment accounted for a huge 6.2 percentage points of overall growth, showing the emphasis on building roads, railways and other infrastructure in the government's stimulus package.
Consumption contributed a positive 3.8 percentage points to GDP, but net exports subtracted 2.9 points - a reflection of the slump in demand for Chinese goods triggered by the global crisis.
Reuters