China Economic Update – July 2013

According to recently released National Accounts data, the Chinese economy grew 1.7% in the June quarter to be 7.5% larger than the same period last year. This result is in line with our forecast for the quarter.

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  • According to recently released National Accounts data, the Chinese economy grew 1.7% in the June quarter to be 7.5% larger than the same period last year. This result is in line with our forecast for the quarter, but is a solid outcome relative to the recent spate of soft partial indicators nonetheless.
  • Partial economic indicators show that weak overseas demand has weighed on China’s manufacturing sector, although domestic demand has also been softer, due in part to the government’s rebalancing efforts – including a tighter stance on credit policies. Investment growth eased further, while real retail sales growth lost some momentum.
  • Slower growth is partly by design, but maintaining this pace in H2 2013 would see annual growth dip below the government’s target of 7.5%. This could suggest some downside risk to our current forecast of 7½% for 2013 (7¼% for 2014).
  • CPI inflation remains well within acceptable levels, but policy makers are more likely to rely on money market operations and structural reforms to encourage growth rather than all out monetary easing – although this can not be ruled out if growth dips significantly below target.
  • This month we included a closer look at China’s surging online retail sector.

For further analysis download the full report.