China’s Q2 GDP improves on mini-stimulus – infrastructure spending key to recovery: HSBC

HONG KONG – China’s second quarter GDP growth numbers have surprised on the upside, up to 7.5% from 7.4% in the first quarter. Sequential growth rebounded to 8% sa from 6% on an annualised basis, reflecting the impact of cumulative easing measures so far this year. Infrastructure investment and related manufacturing sectors were the key drivers.

HSBC says it expects policy-makers to maintain their accommodative stance in coming months to consolidate the growth recovery. “Today's upside surprise reflects the stronger than expected impact of mini-stimulus measures, particularly its second round effect on the broader manufacturing sector,” the bank says.

“As we have noted for some time, the key to sustaining the recovery is continued infrastructure investment, which requires ongoing funding. As funding growth still lags fixed asset investment (FAI) growth, there is more room for more credit expansion to support the recovery.

“The property sector slowdown seems to have moderated in June, but weak funding and sales growth still point to some downward pressure on the economy in the second half.

“We expect both monetary and fiscal policies to remain accommodative in the months ahead to consolidate the recovery.”  www.hsbc.com (ATI).