* Q2 GDP growth 7.5 pct y/y, up from 7.4 pct in Q1
* Government stimulus measures shored up activity
* June activity data may pick up but property weighs
* More policy help seen needed to keep growth on track
(Adds details, official and analyst quotes)
By Kevin Yao and Xiaoyi Shao
BEIJING, July 16 China's economy grew slightly
faster than expected in the second quarter as a burst of
government stimulus paid dividends, but analysts said Beijing
will likely need to offer further support to meet its growth
target for 2014.
Analysts remain cautious about China's economic outlook,
noting that the pick-up in growth was driven more by government
support than a genuine recovery in momentum, as evidenced by a
surprising surge in lending by state-controlled banks in June.
The world's second-largest economy grew 7.5 percent in
April-June from a year earlier, the statistics bureau said on
Wednesday, just ahead of a median forecast of 7.4 percent in a
A raft of stimulus measures helped lift the pace from an
18-month low of 7.4 percent in the first quarter, offsetting the
drag from weak exports and a cooling property market.
"The recovery is quite dependent on government support. So I
think the government can choose either to tolerate lower growth,
or do more stimulus to achieve their growth target," said
analyst Chang Jian at Barclays Capital in Hong Kong.
The unexpectedly hefty increase in bank loans in June was
taken as a signal of Beijing's alarm at the slowdown, and how
far it is prepared to go to get growth back on track to meet its
target of 7.5 percent this year.
Chinese banks, which Beijing uses as a policy tool, lent
1.08 trillion yuan ($174 billion) in June, nearly 20 percent
more than market expectations.
On a quarterly basis, economic growth picked up to 2.0
percent from a revised 1.5 percent in the first quarter, better
than market expectations.
"We cannot be blindly optimistic, because the current
situation is quite complicated," statistics bureau spokesman
Sheng Laiyunfor the statistics bureau, told a briefing.
"The traditional industries are in the middle of adjustments
and such pains could continue for some time, so the economy
still faces some downward pressures," he said.
Part of that pressure stemmed from the housing market
"adjustments", he added.
Indeed, many economists believe the slowing property sector
poses the biggest risk to the economy in the second half of the
year, and thus could dictate whether Beijing sticks to a steady
rollout of modest stimulus measures or considers more aggressive
measures such as interest rate cuts.
Barclays' Chang expected the central bank to cut rates in
the third and fourth quarters, while some other analysts believe
it will stick to milder measures unless the property market
Other data released on Wednesday showed growth in real
estate investment slowed in the first half while sales and new
construction fell, despite generous financing offered by banks.
The sector accounts for over 15 percent of the country's annual
gross domestic product.
Chinese policymakers have to walk a fine line between
stepping up credit support for the economy, especially
cash-starved smaller firms that are vital for job creation,
while avoiding creating new local debt and fueling property
Consumption contributed to 4 percentage points to the first
half GDP growth of 7.4 percent, ahead of 3.6 percentage points
from investment, the bureau said, in line with Beijing's pledge
to reduce dependence on investment and exports in favour of
But analysts pointed to the fact that investment is still
heavily funded by the government, rather than private
businesses, despite Beijing's pledge to allow market forces to
play a vital role in the economy.
"The investment share of GDP is increasingly supported by
credit rather than businesses' retained earnings
or the savings of entrepreneurs," said Bill Adams, senior
international economist for PNC Financial Services Group.
Chinese banks are likely to make 9.5 trillion yuan ($1.5
trillion) worth of new yuan loans this year, their strongest
lending surge since the 2009 financial crisis, a central bank
official was quoted as saying on Tuesday.
Sheng Songcheng, the head of the statistics department at
the central bank, was quoted by the Chinese financial news
service Great Wisdom as saying that banks have increased lending
to China's cooling property market this year in a show of
STUCK ON THE STIMULUS TRAIN?
In recent months the government has rolled out a series of
stimulus measures, including steps to reduce the amount of cash
that some banks have to hold as reserves, instructing regional
governments to quicken their spending, and hastening the
construction of railways and public housing.
Though officials continue to describe such measures as
"fine-tuning", Beijing has been steadily broadening the scope
and depth of its assistance, as indicated by the lending upsurge
and reported moves by local governments to ease home buying
Top leaders have ruled out any massive stimulus as China
struggles to deal with piles of local government debt, the
hangover from a 4 trillion yuan ($644 billion) spending package
implemented in 2008-09 to help cushion the country from the
global financial crisis.
($1 = 6.2098 yuan)
(Editing by Kim Coghill and John Mair)