Business / Economy

China growth data to show stimulus kicking in but more support may be needed

(Agencies) Updated: 2014-07-16 07:33

BEIJING - China's leaders are expecting to see a dividend from three months of stimulus spending in second-quarter growth data on Wednesday, but the economy may need even more support to meet this year's growth target of 7.5 percent.

An unexpectedly hefty increase in bank loans in June is being taken as a signal of Beijing's alarm at the slowdown, and how far it is prepared to go to ensure growth gets back on track.

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Thanks to a raft of government stimulus measures, China's economy likely grew 7.4 percent in April-June from the same period a year earlier, unchanged from the pace in the first quarter, a Reuters poll showed. The first-quarter reading was the weakest in 18 months.

But there could be a modest upside surprise, given that Premier Li Keqiang said last week that growth quickened in the second quarter from the previous three months.

Still, many economists believe more policy support may be needed in coming months to sustain any recovery, particularly if the cooling property market begins to deteriorate more sharply.

"We expect Beijing to continue rolling out small-scale measures to deliver the annual growth target of around 7.5 percent," Ting Lu and Xiaojia Zhi at Bank of America-Merrill Lynch in Hong Kong said in a note.

"That said, we believe Beijing will resist calls for universal and massive easing such as RRR cuts for all banks," referring to the amount of reserves which banks are required to hold.

The government has been rolling out a series of targeted policy measures since April, including steps to reduce the amount of cash that some banks have to hold as reserves, instructing regional governments to quicken their spending, and hastening the construction of railways and public housing.

Premier Li Keqiang vowed recently that the economy would grow by at least 7.5 percent in 2014, surprising many market watchers after a weak start to the year and reinforcing expectations of more government assistance to come.

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