China maintains economic growth in Q2

China-economy

China’s economy grew slightly faster than financial markets expected in the second three months of 2016, expanding by 6.7% from the same period a year ago.

Increased infrastructure spending by the government enabled the economy to stay flat to the pace set in Q1, when growth chalked up its slowest quarter since 2009.

According to Siew Meng Tan, Asia Pacific head of global trade and receivables finance at HSBC, the data showed the need for businesses to remain vigilant as the economic cycle evolves.

“China’s growth prospects are crucial for companies engaged in overseas trade and today’s data underscore the importance of prudently managing balance sheet and working capital risks in this current phase of the economic cycle,” she said.

Fixed asset investment growth, a key gauge of the resilience of economic performance, eased to 9% in the first half of 2016 versus 9.6% in the first five months of the year.

Private sector investment rose 2.8% in the first half of the year, down from 3.9% in the first five months.

Although the market’s response to the data was generally positive, Brian Jackson China economist for IHS Global Insight said the numbers would renew doubts over the quality of Chinese data as well as the nature of the country’s economic growth.

“The first misgiving reflects concerns that the government is squeezing as much growth as plausible from relatively opaque sectors via accounting techniques,” he wrote in a note.

“The second misgiving reflects concern that if the data is wholly accurate, then it implies a deepening shift towards state-led growth in both the secondary and tertiary sector, which raises major doubts about the long term productivity and thus sustainability of current economic activity.”

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