Chinese economy delivers pleasant second-quarter growth surprise

Jasper Jolly
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Since the global financial crisis China has been a key driver of the global economy (Source: Getty)

The Chinese economy grew faster than expected in the second quarter of the year, sustaining its momentum to shrug off investor fears of an impending slowdown.

Output from the world’s second largest economy remained at an annual rate of 6.9 per cent growth, the same as the first quarter, according to the Chinese National Bureau of Statistics.

Consensus estimates had pegged growth at 6.8 per cent, but a strong pick-up in quarter-on-quarter growth, from 1.3 per cent to 1.7 per cent, assured the headline measure remained unchanged.

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Industrial production, still a vital if diminishing part of the Chinese economy, grew by 7.6 per cent year-on-year in June, up from the 6.5 per cent growth in the previous two months and matching the strongest expansion in the sector since the end of 2014. That growth was led by more advanced, high-tech sectors.

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The unexpected strength in China’s economy will give some succour to investors who have been anticipating a gradual cooling in one of the world economy’s growth centres.

China’s leadership is in the middle of managing its transition into a more mature economic model, with a greater emphasis on services as the quick “catch-up” gains from improved industrial technology lessen.

In March the Chinese government adopted its lowest growth target in more than 20 years, at around 6.5 per cent, although it currently looks set to outperform that still-impressive measure.

The National Bureau of Statistics said the economy "performed within an appropriate range with more visible good momentum and achieved steady growth" and said the economy became "more stable, coordinated and sustainable".

However, investor fears will remain that China's economy remains vulnerable to a blow-up if a debt bubble bursts. Central bankers at the Bank of England and the Bank for International Settlements have recently warned debt levels remain too high, with the latter group warning the Chinese economy is exhibiting similar signs to before the global financial crisis.

Yet China is still pushing on to secure a central role in the global economy, with its ambitious One Belt, One Road programme of massive infrastructure investment adding to its increasing integration in global stock and bond markets, symbolised most potently by its addition to prominent stock market indices.

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