China’s economy grew at its slowest quarterly pace in seven years, touching down at levels last seen during the dark days of the global financial crisis in early 2009.
The world’s second-largest economy grew by 6.7% in the three months to the end of June, compared with the same period a year earlier. That is a hair better than the 6.6% forecast in a CNNMoney survey of economists.
“I think it is, in fact, slightly positive,” said Edmund Goh of Aberdeen Asset Management. “I think a lot of people are really expecting slower growth, but the fact that it is slightly above what the market was pricing in, is a positive sign.”
Markets in China appeared unruffled and were little changed in Friday morning trading.
The glimmer of good news is unlikely to last long, however. For 2016 as a whole, economists surveyed by CNNMoney expect GDP growth to fall to 6.5%, the bottom end of the government’s own target of between 6.5% and 7%. Looking ahead, economic expansion in 2017 is expected to slow further to 6.3%.
“Growth is more likely to pick up over coming months than slow further, but a lasting turnaround is not on the cards,” said Daniel Martin and Mark Williams at Capital Economics.
China’s pace of growth makes it one of the world’s stronger performers, but it remains a far cry from the heady days of 10% growth or more, which is why China has many experts and investors on edge.
After breakneck expansion for decades, China’s economy is slowing, partly because of Beijing’s efforts to reduce the country’s reliance on manufacturing and encourage the service sector. The country is also burdened with high levels of debt after years of aggressive lending.
Doubts that persist about the accuracy of China’s official figures have some experts worried that things are worse than Beijing is letting on.
Capital Economics, for instance, estimates that China’s economy expanded at just 4.5% in the second quarter.
There are also concerns that President Xi Jinping’s four-year campaign against corruption has taken a serious toll on GDP growth, said Kevin Lai of Daiwa Capital Markets ahead of the data release.
There’s no question that the pain is being felt widely. China announced in late February that it was planning to shed 1.8 million coal and steel jobs in an effort to reduce excess capacity. The cuts represent about 20% and 11% of China’s coal and steel jobs, respectively, according to IHS Insight.
One major concern is how the government will implement these changes, said IHS China economist Brian Jackson. “If local officials pursue closures too quickly, it could spark major labor protests,” he said.
China is coming off a turbulent 2015 for markets and the yuan, which undermined investor confidence in Chinese authorities’ ability to manage the economic slowdown smoothly.