Q2 GDP growth at 10.3%

People walk past a billboard in a shopping mall in Beijing Thursday. China said its economic growth slowed in the second quarter, as massive stimulus spending was scaled back and moves to rein in soaring property prices started to bite. Photo: AFP

China's economy registered a double-digit growth rate in the first half of the year, even as the market cooled a bit in the second quarter in line with market expectations, official data showed Thursday.

While analysts excluded the possibility of a double-dip, some suggested that China should prepare itself for growth figures that aren't as remarkable as they've been in the past three decades, which would actually be more in line with a sustained development.

The economy expanded at a 10.3 percent rate, year-on-year, from April to June, slower than both the 11.9 percent growth in the first quarter and the 10.7 percent growth in the fourth quarter of last year, National Bureau of Statistics (NBS) spokesman Sheng Laiyun said at a press conference Thursday.

The decline in gross domestic product (GDP) growth has been echoed by other indica-tors, with industrial production growth falling to 13.7 percent in June from 16.5 percent in May, sharper than expected, and retail sales expanding at 18.3 percent last month, slowing from May's 18.7 percent.

But Sheng said the slowdown is likely to help accelerate the transformation of the economic model and avoid overheating.

Despite the slowdown in growth, China's GDP hit 17.28 trillion yuan ($2.55 trillion) in the first six months of this year, up 11.1 percent from a year earlier, according to preliminary statistics.

It was 3.7 percentage points higher than in the same period last year, when the country's economy was still wrangling with the effects of the global financial crisis, and also higher than the annual economic growth target of around 8 percent for 2010.

Ba Shusong, deputy director of the Institute of Finance with the State Council Development Research Center, told the Global Times Thursday that the double-digit, half-year increase is basically as expected, but the cooling pace will continue over the rest of 2010.

Those expectations were echoed by Ting Lu, an economist with Bank of America Merrill Lynch in Hong Kong, who expected GDP growth to fall further to 9.6 percent in the third quarter and 9 percent in the fourth, while maintaining the forecast for annual growth at 10.1 percent in 2010 and 9 percent in 2011-2012.

"We expect more economists on the street to cut their overly bullish forecasts in coming weeks," Lu told the Global Times in an e-mail.

Brian Jackson, a strategist with the Royal Bank of Canada in Hong Kong, noted that external factors are likely to determine the severity of the slowdown in the second half of the year.

Reuters commented Thursday that the latest macro data reinforced the view that the first quarter marked a cyclical peak for China, which is set to overtake Japan this year as the world's second-largest economy after the US.

A mixing of policies

Markets worry that the government is applying the brakes too hard to an economy that has been a major engine of the global recovery from the deepest recession in 80 years.

Ba noted that the government should be cautious about further policy tightening, including raising interest rates, as the economy is slowing and inflation dropped to 2.9 percent in June from 3.1 percent in May, lower than market expectations.


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