July 16, 2012
China’s Q2 real GDP growth slowed to 7.6% yoy (1.8% qoq, sa) after 8.1% yoy in Q1 – the slowest rate since Q1 09 – putting H1 12 growth at 7.8%.
Q2 growth was in line with market expectations. Details show that while the slowdown occurred across all sectors, deceleration in the real estate segment was more pronounced. This suggests that the government’s resolve not to unwind curbs on property markets had an impact. Deceleration in growth so far has been orderly, with macro-stability intact. However, micro-level data has been worrying i.e. poor corporate revenues and a rise in account receivables. This will no doubt lead to mounting pressure for more accommodating policies.
The most likely scenario is marginal easing of property market curbs, further easing in monetary policy to support liquidity and targeted stimulus measures to bring forward some infrastructure projects, with a view to preserving jobs and supporting consumption. This should help to contain systemic risk arising from bankruptcies and defaults. The rebound in H2 is not yet assured, as suggested by leading indicators such as PMI. But we expect public investment, as shown by the recent pick-up in fixed asset investment, to limit the downside.
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16.05.2013
