China GDP growth slows slightly in Q2, authorities may further ease monetary and fiscal polices

The Chinese economic growth decelerated in annual terms in the second quarter of this year. The GDP grew 6.7 percent in the June quarter, a slowdown from 6.8 percent in the first quarter. But too much should not be read in the lower annual number as in quarterly terms, growth is estimated to have amounted to 1.8 percent, stated Nordea Bank in a research report.

Therefore, the economic growth rates do not indicate any drama going on in the Chinese economy at the moment, just as anticipated, some monthly indicators do point to a direction that growth is losing momentum but only very gradually. In particular May-June, several sectoral growth figures took a turn to lower levels. This applied for instance to credit growth and industrial production. Meanwhile, developments in the real estate sector continue to be surprisingly resilient and the structural shift towards more consumption based economy carries on.

Net exports’ contribution to the economic growth continued to be negative. The monthly data on recent developments in foreign trade showed exports and imports growing although monthly volatility often makes it difficult to draw solid conclusions.

The direct effect of the U.S. import tariffs on Chinese foreign trade has so far been restricted. The fact that the tariffs implemented in July were known beforehand might have slightly stimulated bilateral trade in June.

Overall, the Chinese authorities are likely to further loosen up monetary and fiscal policies if growth figures or negative effect of trade restrictions begin to be worrying, added Nordea Bank.

At 13:00 GMT the FxWirePro's Hourly Strength Index of Chinese Yuan was bullish at 81.0422, while the FxWirePro's Hourly Strength Index of US Dollar was neutral at -29.0787. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex