Daily Management Review

Chinese Second Quarter Economic Growth Potentially to be Weakest in Seven Years at 6.6 Percent,


Chinese Second Quarter Economic Growth Potentially to be Weakest in Seven Years at 6.6 Percent,
As the industrial sector loses steam and a boost from financial services fades, China's economic growth likely cooled to a fresh seven-year low of 6.6 percent in the second quarter according to a Reuters poll of 61 economists.
Prompting the government and central bank to roll out more support measures even as they worry about fallout from Britain's secession from the European Union, analysts expect the world's second-largest economy to lose further momentum in the second half of the year.
Adding to a wall of worry for international investors that could in turn signal fresh weakness for the yuan, which recently slid to 5-1/2 year lows.
Since the first quarter of 2009, when it fell to 6.2 percent during the global financial crisis, the expected April-June growth rate would be the weakest and compares with 6.7 percent in Jan-March. Noting its slowest rate in more than two decades, China's economy grew 6.9 percent in 2015.
Though concerns are growing that over reliance on debt and government spending threatens a "vicious cycle" of slower growth and delayed economic reforms, policymakers have relied on record credit expansion and an infrastructure spending spree to stabilize growth. A huge bank restructuring may be inevitable, some analysts believe.

The dangers of another massive credit-led stimulus like that during the global crisis were cited by an "authoritative source" in the official People's Daily in May. Soon after the economic data missed expectations in May as credit expansion started to slow.
As the Chinese government struggles to put the economy on firmer footing and private investment dwindles, data in recent months have shown the government is bearing an increasing amount of the load.
As a boost from record credit growth was already fading, fixed-asset investment slipped below 10 percent for the first time since 2000 in January-May.
With growth cooling to 3.9 percent from double-digits last year, investment by private firms slowed to a record low for the year through May. Since China began publishing the data in 2012, private investment so far this year has been the slowest.
Despite an uptick in services, factory surveys have shown stagnation in the manufacturing sector. But as many investors continue to shun the country's stock markets after last year's crash, growth in the finance industry, a key part of the services sector, is expected to slow sharply in the second half.
Despite the fact that only 13 analysts gave sequential forecasts, economists in the poll estimated GDP grew 1.6 percent quarter-on-quarter, up from 1.1 percent in the first quarter.
Along with monthly indicators on investment, industrial output and retail sales, GDP data will be announced on July 15.
For January-June, the fixed asset investment growth likely cooled further to 9.4 percent. For the first time investment expanded by only single digits since 2000 was the 9.6 percent pace recorded in the first five months of the year.
As record low spending by private firms so far this year indicates a gloomy outlook for future business prospects, analysts will be closely watching the portion of investment that comes from the private sector.

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