China Flash: Q2 GDP figures point towards a recovery of China’s economy

China’s second quarter GDP figures surprised on the upside, increasing to 7.5% y/y, from 7.4% y/y in the previous quarter (Chart 1). This was slightly higher than market expectations (BBVA: 7.3% y/y; Consensus: 7.4% y/y), showing signs of stabilization. In sequential terms, Q2 GDP was 2.0% q/q sa, increasing from 1.5% q/q sa in Q1. The stabilizing trend is due to the authorities’ mini-stimulus policies, which were first implemented in March this year, as well as improving external demand. Other June economic indicators further confirm this trend, including improving industrial production which is 9.0%; compared with previous 8.8%, and stabilizing retail sales which is 12.4%, compared with previous 12.5%. Despite large-scale interventions are unlikely, we expect the Chinese government to continue to implement growth-supportive measures (such as the mini-stimulus policies) to sustain moderate growth in the coming quarter, providing momentum to the current stabilizing trend in the second half of the year.

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