China growth up but further stimulus expected after stock market crash
China's economy grew an annual 7pc in the second quarter, steady with the previous quarter and slightly better than analysts' forecasts, though further stimulus is still expected after the quarter ended with a stock market crash.
Monthly activity data, released alongside the GDP report, also beat expectations across the board to show signs of a rebound, with factory output hitting a five-month high, following reports of increased bank lending yesterday.
It has been a difficult year for the world's second-largest economy. Slowing growth in trade, investment and domestic demand has been compounded by a cooling property sector, deflationary pressure, and the recent equity market panic, so signs of improvement may help buttress faltering investor confidence in the effectiveness of Beijing's management.
Beijing will still need to provide liquidity to buttress its still-rickety stock exchanges - which the statistics bureau described as key to economic stability - and to reduce the cost of corporate financing, which remains far higher than returns on investment for many companies.
Economists have also called for more direct fiscal stimulus to help support local governments as they grapple with a mountain of debt.
Fiscal expenditure rose 13.9pc on an annual basis in June, a sharp rise from May's low 2.6pc but well below April's 33.2pc spike.
The surprisingly positive readings have some analysts questioning the accuracy of official data, suggesting they are more about reassuring investors than true reflections of performance. For example, June power output only increased 0.5pc year-on-year, even though factory output climbed 6.8pc.
The National Bureau of Statistics rejected suggestions that figures were being inflated.
It is not only the government reporting a warmer second quarter; the recent independent China Beige Book survey also reported signs of a broad-based recovery for the period, which it said was largely driven by growth in the interior provinces.
Stock markets have stabilised since the central bank began serving as indirect buyer of last resort, but sharp rallies last week were not sustained this week.
Chinese stock markets did not celebrate the growth figures, with benchmark indexes down more than 2pc.
Before the market plunged in June, key indexes had risen nearly 60pc in the first half, which some economists estimate added more than a percentage point to total GDP growth in that period, mostly by boosting activity in the financial services sector.
If that boost peters out now the market appears to have run out of steam, it could drag on third-quarter figures.