China: GDP decelerates slightly in Q2 but growth remains robust
July 12, 2011
In the second quarter, GDP expanded 9.5% over the same period last year, continuing along the moderating trend in place since Q2 2010 and supporting the notion that the world's second-largest economy is cooling to more sustainable growth levels. The reading came in below the 9.7% expansion tallied in the previous quarter, but overshot market expectations of a 9.3% increase. Economic growth continues to surprise on the upside in spite of the ongoing aggressive monetary tightening, which aims to protect the country's economy from overheating and excessive inflation. Against the backdrop of resilient economic growth, authorities' focus will likely remain on curbing inflation in the coming quarters. Although the National Bureau of Statistics does not provide a breakdown for GDP by expenditure, additional data suggest that investment remained as the main economic growth engine, while private consumption accelerated somewhat. In the first six months of 2011, urban fixed-asset investment, which includes capital and construction investment, climbed 25.6% in nominal terms (Q1: +25.0% year-on-year), while retail sales accelerated to 16.8% in the same period (Q1: +16.3% yoy). On the other hand, net exports contributed positively in the first six months up to June, as the trade balance rebounded strongly in Q2 after the shortfall recorded in Q1. At the sector level, the January-June period saw the industrial sector jump 11.0% over the same period last year (Q1: +11.1% year-on-year), while services rose 9.2% (Q1: +9.1% yoy). Meanwhile, agriculture decelerated to 3.2% (Q1: +3.5% yoy). A quarter-on-quarter analysis does not corroborate the slight slowdown suggested by the annual figures, as GDP expanded a seasonally adjusted 2.2% in the second quarter, a notch above the 2.1% tallied in Q1. The National Development and Reform Commission (NDRC) currently expects economic growth to slow to 8% this year and to close at 7% in the 2011-2015 period, according to the 12th Five-Year Plan.