Chinese economy grows but warning signs still persist

China’s economy expanded slightly faster than expected in the second quarter, new data shows, but private investment growth shrank to a record low, suggesting future weakness which could pressure the country’s government to roll out more support measures.

Property investment, which has given the world’s second-largest economy a welcome boost in recent months by spurring demand for products from cement to steel, also showed signs of fatigue in June, with growth cooling for a second month.

While fears of a hard landing have eased, investors worry a further slowdown in China and any major fallout from Brexit would leave the world even more vulnerable to the risk of a global recession.

China’s economy grew 6.7% in the second quarter from a year-ago, unchanged from the first quarter but still the slowest pace since the global financial crisis, data showed. Analysts had expected it to dip to 6.6%.

Growth in investment by private firms, which accounts for over 60% of total investment, fell to a new record low in the first half of the year, as businesses retrench in the face of the sluggish economic outlook and weak exports.

“While there was a big pick-up in retail sales, the slowdown in fixed-asset investment is a worry. Given the slide in fixed-asset investment growth, I’m inclined to keep my forecast of slowing growth over the course of the year,” said Tim Condon, chief economist for Asia at ING in Singapore.

Fixed asset investment growth in the first half slowed to 9%, the weakest since March 2000.

“We think GDP growth is likely to slow in the third quarter and may rebound in the fourth driven by post-flood reconstruction activity. But the rebound will not last long,” said Nomura economist Wendy Chen.

China’s statistics bureau said the economy still faces downward pressure, but added that first-half performance lays a good foundation for achieving the government’s full-year growth target of 6.5%-7%, which some market watchers believe is ambitious.


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