China's economy fared better than expected in Q2: Here's why
What's the story
China's economy has shown resilience against US tariffs, with a 5.2% growth in the second quarter of this year. The growth rate is slightly lower than the first quarter's 5.4%, but it beats analysts' expectations of a 5.1% increase, according to Reuters poll data. The world's second-largest economy has avoided a sharp slowdown so far, thanks to policy support and factories taking advantage of a US-China trade truce.
Future outlook
Many analysts consider China's goal ambitious
Despite beating the growth target of 5% in Q2, many analysts consider China's 5% annual growth target ambitious, given persistent deflation and weak domestic demand. Zhiwei Zhang, Chief Economist at Pinpoint Asset Management, said, "The above target growth in Q1 and Q2 gives the government room to tolerate some slowdown in the second half of the year." On a quarterly basis, GDP grew by 1.1% from April-June, higher than an anticipated 0.9% increase.
Market reaction
Investors are watching for signs of fresh stimulus
China's blue-chip CSI300 Index fell 0.1%, while Hong Kong's benchmark Hang Seng cut gains, after the data came in. Investors are now closely watching for signs of fresh stimulus at the upcoming Politburo meeting due in late July, to shape the economic policy for the remainder of the year.
Policy measures
China has increased infrastructure spending
Beijing has increased infrastructure spending and consumer subsidies, along with steady monetary easing. In May, the central bank cut the interest rates and injected liquidity as part of broader efforts to cushion the economy from US President Donald Trump's trade tariffs. Further monetary easing is expected in the coming months, with some analysts believing that if growth slows down sharply, the government could ramp up deficit spending.