Chinese GDP missed expectations growing 7.6 per cent in the second quarter, and down from 8.1 per cent in the first quarter. This was the slowest growth rate since the first quarter of 2009.
But there were some positive signs among leading economic indicators, with growth in approved investment for new projects climbing 23.2 per cent in June, from 22 per cent in May which suggests that public investment growth will pick up in coming months. Moreover, property market transactions were up, and final new loans and money supply offered positive surprises growing more than expected in June.
Given all this, Nomura’s Zhiwei Zhang believes that GDP growth bottomed in the second quarter and will rebound in the second half of the year. In fact, he writes, “we believe the government is becoming less tolerant of an economic slowdown, as GDP growth is very close to its annual target of 7.5%, and we are approaching the important Communist Party meeting in October where the leadership transition is expected to take place.”
And Societe Generale’s Klaus Baader shares this view and sees signs that the Chinese economy is bottoming out.
Baader writes, “the official report contained a piece of good news, which was that quarterly growth quickened to 1.8% qoq (s.a.) from 1.6% in Q1, which was stronger than median expectations. While not too much emphasis should be placed on this, it may be a sign that growth has already bottomed in Q1.”
Chinese premiere Wen Jiabao has made clear that stabilizing China’s economic growth is a priority and markets are likely to be positive on this GDP data since they now expect more policy easing measures.
Now here’s a chart from Societe Generale that shows the trajectory of Chinese GDP and industrial production:
Photo: Societe Generale
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