Second-quarter growth prompts concern

China's economy grew 6.3 percent year on year in the second quarter, disappointing the markets, and the weakening retail sales and sluggish property investment further cloud the second-half outlook.

Data from the National Bureau of Statistics showed that the first-half gross domestic product growth was 5.5 percent year-on-year, with the second-quarter reading of 6.3 percent missing estimates of around 7 percent.

The value to retail sales in June inched up only 3.1 percent from one year ago, slumping from 12.7 percent in May. For the first six months of this year, the figure increased 8.2 percent year-on-year.

Property investment dipped 7.9 percent yearly in the first half, widening from 7.2 percent for the first five months, despite loads of supportive measures from Beijing.

Commercial homes saw the growth of sales value significantly slow to 1.1 percent yearly in the first half, versus 8.4 percent during the January-May period. And the sold areas fell 5.3 percent yearly in the first half, compared with a slide of 0.9 percent for the first five months.

NBS defended that the mainland real estate industry is shifting to stable development from the rapid expansion in the past.

But the output of companies with annual revenue of 20 million yuan (HK$21.8 million) or more expanded by 4.4 percent yearly in June, faster than 3.5 percent in May, also beating the market estimate of 2.7 percent.

Overall, the data released yesterday gave a clear signal that China's post-Covid economic recovery is losing momentum faster after the quick pick-up in the first quarter.

NBS said that China is confident of achieving the full-year GDP growth target of around 5 percent, but some analysts warn it could narrowly meet its goal or even miss it, citing the weak confidence in consumption and the property market.

Citigroup lowered its forecast for China's full-year GDP growth to 5 percent from 5.5 percent, even having considered supportive measures in the next few months.

Citi said there is a risk for the world's second-largest economy to miss its goal, but believes the upcoming Politburo meeting will bring some clues.

ANZ Bank chief Greater China economist Raymond Yeung predicts a 4.9 percent growth this year, as the consumption recovery will remain sluggish amid high youth unemployment and the property transactions will stay flat in the second half. Yeung also estimated the real second-quarter GDP growth read only 3-4 percent, if excluding the low base in the same period of last year.

With the disappointing economic data, Morgan Stanley expects Beijing will release more supportive measures, such as a 0.25 ppt cut of reserve requirement ratio by the People's Bank of China in the third quarter.

But Invesco saw a lower possibility of large-scale stimuli from Beijing, as most sectors showed a stable performance in June, hinting that PBOC maintained the policy rate.