Business

China's economy grew 6.9% in second quarter

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That was unchanged from the previous quarter, and it exceeded expectations for a rise of 6.8 percent.

Likewise, retail sales growth accelerated to 11% in June from 10.7% in May, while growth was expected to ease to 10.6%.

China's gross domestic product (GDP) for the second quarter continued its pace in the first quarter as industrial output and strong consumption lifted the country's factories.

Investment, the biggest single component of economic growth in recent years, rose by 8.6% in the first half of the year, but that was down from 0.6% from the first quarter's expansion.

The annual growth was forecast to slow to 6.8%.

In the second quarter, GDP growth was steady at 6.9 percent year on year, flat from the first quarter, but well above the government's annual growth target of 6.5 percent.

According to China's official statistics, the economy should have grown 6.7 percent y/y if calculated from the GDP index (which is seasonally adjusted), 0.2 percentage points lower than the headline growth numbers.

Economist Zhou Hao thinks so too saying that even though the country was better than expected in the first half of the year, a slowdown was likely to happen.

Debt-fueled investment in infrastructure and real estate has underpinned China's growth for years.

Steel rebar margins were nearly 1,000 yuan ($147.77) per tonne in June, enticing mills to increase output, said Bai Jing, analyst at Galaxy Futures.

Despite concerns of the fallout from risks in the financial system, analysts say stability is the word of the day ahead of a once-every-five-years Communist Party Congress coming in the fall when a leadership shuffle is expected. A report on how - or if - the US will react could come as early as this week. In addition, more efforts are needed to strengthen SOE reforms, improve local governments' fiscal positions and crack implicit government guarantees. In May, Moody's Investors Service downgraded China's credit rating for the first time in almost three decades, saying it believes the rapid build-up of debt is eroding the country's financial strength.

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