National Bureau of Statistics of China released macroeconomic data for the first half year of 2016 last Friday. According to the preliminary estimation, the gross domestic product of China expanded by a 6.7 percent year-on year growth in second quarter, narrowly beating an economist estimate of 6.6 percent. Compared with last quarter, 2Q GDP increased by 1.8 percent.
“China’s economy showed moderate but steady growth in the first half year”, Chinese government spokesperson Sheng Laiyun said, “but a great economic downturn pressure still exists, considering the complex domestic and foreign environment”.
While the growth is slightly better than the estimate, it was primarily driven by the governmental stimulus instead of private sectors. In the first half year, the investment in fixed asset was 25.84 trillion yuan. The investment made by the state holding enterprises was 9.10 billion yuan with an increase of 23.5 percent; that made by private sector was 15.88 trillion, with a much lower growth rate of 2.8 percent. The government sector’s activity compensated private sectors’ unwillingness of investment. More likely, these numbers show private sectors have limited access to credit from state-owned banks.
China is continuing optimizing its economic structure which relies excessively on manufacture and export. Its so called supply-side structural reform includes cutting overcapacity, reducing inventory, deleveraging, lowering costs and strengthening weak links. Early this year, China targeted its economic growth expectation from 6.5 percent to 7 percent for 2016. In 2015, the GDP of China was 67.7 trillion yuan at a growth rate 6.9 percent, its slowest pace in 25 years.