China: Q2 GDP beat expectations, manufacturing recovery strengthens - HSBC

China’s Q2 GDP beat expectations, rising 6.9% y-o-y in real terms and 11.1% in nominal terms as the manufacturing recovery, which started in mid-2016, gained further strength as both output and investment accelerated, explains Julia Wang, Economist at HSBC.

Key Quotes

“Private business investment also strengthened further, growing 8.2% y-o-y. PMI reading and confidence indicators suggest that the cyclical recovery should continue in the coming months, although at a softer pace as the housing sector moderates. The private-sector dominated manufacturing sector will continue to lead the recovery, which is positive for productivity growth and can also help to ease debt concerns.”

“Policy wise, the National Finance Work Conference over the weekend suggests regulatory reforms and SOE de-leveraging are the next items on the agenda for Beijing. Both are good for the long run health of the economy. Nonetheless, a balanced approach should be taken in order to minimize the spillover effect on the private corporate sector.”