World Economy

China Q2 Growth Beats Forecasts

China Q2 Growth Beats ForecastsChina Q2 Growth Beats Forecasts

China's economy expanded more than expected in the second quarter of the year, Beijing said Friday, fuelling hopes growth may be stabilizing, but analysts warned private investment was worryingly low.

The world's second biggest economy grew 6.7% year on year in April-June, slightly quicker than forecast in an AFP survey and the same as the year's first quarter.

The result is also in line with the government's 6.5-7% target for the full year and will provide some relief as China—and key driver of the global economy—suffers its worst rates of growth for 25 years.

"The national economy has achieved moderate but steady and sound development," National Bureau of Statistics spokesman Sheng Laiyun said.

However analysts said much of the expansion was driven by state investment in infrastructure and credit growth, suggesting it may be hard to maintain in the longer-term.

Markets were unmoved by the figures, with Shanghai's composite index ending the day flat.

"China is on track of achieving this year's growth target," said Zhu Haibin, JP Morgan China chief economist. But he added that "investment continues to be on the weak side, especially private investment".

After decades of breakneck growth, policymakers claim to be embracing weaker expansion as a trade-off for structural reforms to wean the country off cheap exports and massive government spending in favor of domestic consumption.

But the latest figures show the transformation is proving tough, with mounting debt a key concern for global investors.

Fixed asset investment, a gauge of infrastructure spending, rose 9% in the first half of the year following a record credit binge in the first quarter aimed at stimulating the economy.

New bank loans jumped to nearly 1.4 trillion yuan ($204.9 billion) in June, the central bank said Friday, up dramatically from around one trillion the previous month, as borrowers took advantage of loosened lending standards put in place by Beijing.

Investment by private businesses grew by less than 3% in the first half of the year, the data showed, with Sheng blaming overcapacity in traditional industries, barriers for private firms to enter some sectors, and limited access to loans.