China's second quarter growth beats expectations at 6.9%

China posted a trade surplus of $42.77 billion in June slightly above analyst forecasts for a surplus of $42.44 billion. Reuters

Economic growth in China was steady over the second quarter of the year, official data revealed. Industrial output, which rose 7.6% from the same period a year ago, paced the GDP gains, while an 11% surge in retail sales underscored the strength of the domestic consumer economy.

But the latest data is well above Beijing's 6.5% growth target for 2017. The result outpaced an expectation for 6.8% growth by economists polled by The Wall Street Journal.

China's fixed-asset investment from January to June was also up 8.6 percent in the first half of the year compared to average forecast of 8.5 percent.

Nonetheless, according to the research house's own China Activity Proxy, which was created to give more reliable readings, Chinese GDP was in fact little changed in the second quarter, slowing from a 6.5% pace to 6.3%.

China aims to create more than 11 million jobs this year, 1 million more than last year's target.

As China steps up efforts to fend off financial risks ahead of a five-yearly party congress in the fall, economists forecast that its economy will slow moderately in the months ahead.

According to market analysts, the world's second largest economy may witness weaker growth in second half of the year as policy measures may lead to rise in housing prices and a rapid build-up in debt instruments.

The PBOC shifted to a modest tightening bias at the start of this year, guiding market interest rates higher during the first quarter, including immediately after the U.S. Federal Reserve raised rates in March.

President Xi Jinping said at the National Financial Work Conference, held on July 14-15, that China should steadily promote the yuan's internationalisation, deepen reforms in the yuan exchange rate mechanism, and achieve yuan convertibility.

The composition of Chinese exports also changed in ways that could intensify trade friction and affect China's trade surplus.

Shilen Shah, bond strategist at Investec Wealth & Investment, said: "The better than consensus print for Chinese Q2 GDP suggests that the economy is maintaining momentum with both industrial output and fixed asset investment somewhat stronger than estimates". But since taking office, he has focused more heavily on addressing North Korea's nuclear and ballistic missile programs and on very narrow trade talks involving industries like steel manufacturing and beef production.

While there is much debate around the accuracy of China's official economic data, last week the Chinese statistics bureau announced it has revised the way it calculates the country's GDP.

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