Following weeks of stock market turmoil, China has confounded expectations that its economic growth would slow further in the second quarter, with gross domestic product rising by 7%.
Analysts had widely predicted that economic growth would dip from 7% in the first quarter to around 6.8% in the second.
However, GDP held steady, officials from China’s National Bureau of Statistics claimed on Wednesday morning. The figure still represents the lowest level of growth since the 2009 global financial crisis but is in line with Beijing’s official target for 2015 of “around 7%”.
“The national economy has been running within proper range and the major indicators picking up steadily, showing moderate but stable and sound momentum of development,” China’s National Bureau of Statistics said in a statement.
The announcement of stable second quarter growth surprised analysts, offered a boost to Beijing’s attempts to soften the country’s economic slowdown and came after weeks of chaos in the Chinese stock market which saw more than $3tn wiped off shares.
“I think that at this particular moment – given the fragile sentiment which is still recovering from the market meltdown – not having very bad numbers is helpful. It’s a matter of confidence,” said Dali Yang, the director of the University of Chicago Center in Beijing.
“If even the official numbers were significantly below official targets, that would help spread a gloomy sentiment. To generate a set of numbers that are in line with the official targets [represents] an injection of some confidence, it helps with the overall sentiment.”
However, there were immediate doubts over the growth figure’s reliability with the announcement sparking renewed debate over the trustworthiness of Beijing’s statistics.
The fact that the figure was exactly in line with the Communist party’s 2015 full-year growth target “raises suspicions,” said Yang. “There is the issue of credibility, certainly.”
China’s premier, Li Keqiang, tried to put a brave face on the recent stock market collapse during a meeting on Friday with economists and business leaders in Beijing.
“China’s economy still boasts remarkable tenacity, potential and flexibility,” Li said, according to state media. “There is little doubt that China’s potential for medium-high growth remains underpinned by strong, long-term fundamentals. The global economic recovery is full of twists and turns. China should push forward its own development with stronger confidence and greater efforts.”
However, Beijing has faced criticism for its handling of the crash. Chinese president Xi Jinping has vowed to reduce Beijing’s role in the economy but as stocks plunged earlier this month the Communist party took drastic measures, including temporarily halting initial public offerings.
“It does show that the Chinese markets are not exactly a free market yet – that this is very much a politically-affected market,” said Yang, the University of Chicago political scientist.
Xi Jinping and Li Keqiang, who is a trained economist, have vowed to pursue a “new normal” form of economic growth that is slower but more sustainable.
Under that “new normal” Beijing is looking to boost domestic consumption as it attempts to move away from its export-fuelled boom.
Last year China’s economic growth fell to 7.4% – the lowest level since 1990, when the country was facing international sanctions in the wake of the military crackdown on Tiananmen protestors.
“To a certain extent, the latest slowdown is inevitable and desirable,” Xinhua, China’s official news agency, said on Tuesday ahead of the growth announcement.
“More than three decades of break-neck growth, driven by over-reliance on exports and over-investment in sectors like real estate and factories, has left the country with vacant houses, idle factories and piling corporate debt.”
In its statement on Wednesday the National Bureau of Statistics warned: “We must be aware that the domestic and external economic conditions are still complicated, the global economic recovery is slow and tortuous and the foundation for the stabilisation of China’s economy needs to be further consolidated.”
However, “the major indicators of the second quarter showed that the growth was stabilized and ready to pick up, the economy developed with positive changes, and the vitality of the economic development was strengthened,” it added.
But Wang Tao, the chief China economist for investment bank UBS, told Bloomberg TV: “We are not looking for an uptick in GDP growth in the second half ... We still think that for the year growth is going to be below 7%.”
Despite the stock market calamity, “in general, the leadership remains upbeat about the outlook,” Lian Ping, Bank of Communications chief economist, told the South China Morning Post. “The planned reform is still on the right track.”
This article was written by Tom Phillips in Beijing, for theguardian.com on Wednesday 15th July 2015 05.21 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010