China GDP hits 7.9% second quarter growth

China’s gross domestic product grew 7.9 percent in the second quarter as the nation became the first of the major economies to rebound from the global recession.

The figure, announced by the statistics bureau in Beijing today, exceeded the 7.8 percent median forecast of 20 economists in a Bloomberg survey and a 6.1 percent gain in the first quarter that was the slowest in almost a decade.

China, the biggest contributor to global growth, overtook Japan as the world’s second-largest stock market by value yesterday after a 4 trillion yuan ($585 billion) stimulus package spurred record lending and boosted share prices. The first-half expansion laid the foundation for meeting the year’s 8 percent growth target for creating jobs and maintaining social stability, the statistics bureau said today.

“China’s growth is getting back on track after being pulled down by the global export slump,” said David Cohen, an economist with Action Economics in Singapore. “It’s leading the turnaround in the global economy.”

The yuan traded at 6.8315 against the dollar as of 12:15 p.m. in Shanghai, unchanged from before the data were released. The Shanghai Composite Index rose 0.7 percent.

Urban fixed-asset investment surged 35.3 percent in June from a year earlier, the statistics bureau said. The 33.6 percent gain for the first half was the biggest in five years. Industrial production increased 10.7 percent in June from a year earlier, the largest gain in nine months excluding seasonal distortions. Retail sales climbed 15 percent.

Falling Profits

The foundation of China’s recovery is “not yet firm” after the economy stabilized in the first half and the government will stick to its “moderately loose” monetary policy and “proactive” fiscal stance, statistics bureau spokesman Li Xiaochao said.

“China still faces difficulties including shrinking external demand, falling corporate profits and declining fiscal revenue,” Li said. “We’re still facing great pressure in generating jobs.”

China’s economy is the only one of the world’s 10 biggest still expanding. The People’s Bank of China sold today one-year and three-month bills at the highest yields this year, guiding money-market rates higher to slow record growth in money supply.

The nation’s foreign-exchange reserves rose to a record $2.132 trillion last quarter as investors abroad pumped money into stocks and property, a central bank report showed yesterday.

‘Recovery on Track’

“China’s recovery is on track and growth may accelerate to near 9 percent in the third quarter and 10 percent in the fourth quarter,” said Lu Ting, an economist at Bank of America-Merrill Lynch in Hong Kong. “The government won’t tighten policies too early but it should tell banks not to lend without limit.”

China is targeting faster growth to maintain stability after the loss of millions of migrant workers’ jobs and ahead of the 60th anniversary of Communist Party rule in October. Ethnic riots in Urumqi in the northwestern Xinjiang province on July 5 left at least 192 people dead.

The rebound in GDP snaps a two-year run of progressively slower growth.

Shanghai’s benchmark stock index has climbed almost 90 percent from last year’s low, with PetroChina Co. and Industrial & Commercial Bank of China Ltd. contributing the most.

Emerging economies, led by China, are set to regain growth momentum in the remainder of this year, helping the world economy to recover from the worst slump since World War II, the International Monetary Fund said in a July 8 report.

China accounted for a third of global growth last year, according to IMF data, which uses purchasing power parity calculations to account for differences in exchange rates.

China shouldn’t ignore the danger of future inflation as loans surge and global commodity prices rebound, the statistics bureau’s Li said at today’s briefing.

Consumer prices fell 1.7 percent in June from a year earlier, the fifth monthly decline and the biggest drop since 1999, today’s data showed. Producer prices slid a record 7.8 percent.

Source: Bloomberg

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