LDN - Business

Industrial recovery drives China's second-quarter GDP as consumption slows

[July 18, 2017] BEIJING (Reuters) - A pick-up in the industrial sector helped China post better-than-expected second quarter economic growth as finance and real estate expansions slowed to multi-year lows, data showed on Tuesday.

That is likely welcome news for Chinese officials that have been trying to tamp down an overheated property market and speculation in financial markets in favor of investment in the real economy and upgrades of China's massive industrial sector.

But a continued slowdown in consumption growth this year could present an ongoing challenge to China's efforts to shift to a consumer-led economy.

The industrial sector, which accounts for about a third of the economy, grew 6.6 percent in the second quarter from a year earlier, data from the statistics bureau showed on Tuesday. That was up slightly from 6.5 percent in the first quarter and the fastest pace since the fourth quarter of 2014.

The real estate sector, meanwhile, only expanded 6.2 percent in the second quarter from a year earlier, the slowest since the end of 2015, and down significantly from 7.8 percent growth in the first quarter, as government curbs dragged on the sector.

Finance sector growth also decelerated to its slowest pace since the third quarter of 2004, after clocking 3.2 percent growth in the second quarter from 4.4 percent in the first quarter.

On Monday, China reported second quarter growth <CNGDP=ECI> of 6.9 percent, unchanged from the first quarter and setting the country on course to comfortably meet its 2017 growth target.

Despite private surveys showing small firms struggling amid weaker demand and greater competition, the statistics bureau said the performance of small and micro businesses was relatively stable in the first half of 2017.

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Laborers work at a steel plant of Shandong Iron & Steel Group in Jinan, Shandong province, China, July 7, 2017. REUTERS/Stringer

A survey showed that business confidence among small and micro companies rebounded to a nearly two-year high in the second quarter on more orders and a better financing environment, NBS official Zhao Yuncheng wrote in a commentary.

That is in contrast to a long-running survey by Standard Chartered showing business activity for smaller Chinese firms hit the lowest in 16 months in June.

CONSUMER SPENDING GROWTH SLOWS

While policymakers continue to trumpet China's shift to a consumer-oriented economy - it contributed the lion's share of growth in the first half - data from NBS showed real growth in per capita consumer spending of 6.1 percent in the first half was the slowest since the data was first published in 2014.

Second quarter growth of the consumer-driven retail and catering/accomodation sectors was the slowest since the third quarter of last year at 7.1 percent and 7.0 percent, respectively, the data showed.

(Reporting by Stella Qiu and Elias Glenn; Editing by Jacqueline Wong)

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