China’s economy expanded 7.6 percent year-on-year in the second quarter of 2012, slowing from 8.1 percent in the first quarter, the National Bureau of Statistics (NBS) said Friday.
The figure, which marked the sixth consecutive quarter of decline, revealed the slowest growth pace since the first quarter of 2009 and was within market expectation of below 8 percent.
On a quarterly basis, the country’s economy grew 1.8 percent in the second quarter, NBS spokesman Sheng Laiyun said at a press conference.
According to preliminary statistics, the country’s GDP grew 7.8 percent year-on-year to reach 22.71 trillion yuan (3.6 trillion U.S. dollars) during the first half, Sheng said.
“We should not be too obsessed with an 8-percent economic growth. Generally speaking, China’s economy has run smoothly during the first half,” he said.
Although the economic growth rate continued to slow in the second quarter, it was “rather good” compared with developed nations and other emerging economies, Sheng noted.
Given the sluggish external market and global economic woes, China lowered its full-year growth target for 2012 to 7.5 percent in early March, after its economy grew 9.2 percent in 2011 from the previous year.
“The weakening GDP growth was mainly due to falling fixed-asset investment, difficult operations in domestic small and medium-sized enterprises and slackened external demand,” said Wang Jun, a researcher at the China Center for International Economic Exchange.
The GDP data headlined a flurry of indicators published on Friday signalling that the world’s second-largest economy is slowing, boosting investor expectations of continued policy action to support growth.
Sheng reiterated the government’s top priority of stabilizing growth as the country faces increasing downward pressure.
“The government will give higher priority to stabilizing growth, and continue to strengthen and improve macro-control to promote the steady and relatively fast economic growth,” the spokesman said.
Other indicators published Friday showed first-half industrial value-added output rose 10.5 percent year-on-year, down from 11.6-percent increase seen in the first quarter.
Retail sales increased 14.4 percent from one year earlier in the first half, slower than the 14.8-percent growth registered in the first quarter.
Fixed-asset investment, one of the principal drivers of China’s economy, grew 20.4 percent year-on-year to 15.07 trillion yuan. The growth rate moderated by 0.5 percentage point compared to that in the first quarter, and was down 5.2 percentage points from the same period last year.
Although acknowledging that property market regulation has dragged on China’s economy, Sheng stressed the government will not relax its curbs on the sector for the sake of more sustainable economic development.
“Real estate regulation will effectively prevent asset bubbles from hurting the country’s long-term economic growth,” Sheng said, pledging to further improve regulation measures during the rest of the year.
Official data showed that investment in the property sector, which directly accounts for about 13 percent of gross domestic product, rose 16.6 percent year-on-year in the first half, down from 32.9 percent last year.
Sheng is upbeat about China’s economic prospects, saying “the country’s still undergoing a rapid process of industrialization, urbanization, marketization and internationalization, which will unleash huge investment and consumption potential to bolster the economy.”
The spokesman also dismissed concerns over deflation, as money supply has not fallen dramatically. M2, a broad measure of money supply that covers cash in circulation and all deposits, increased 13.6 percent year-on-year during the first half, according to central bank data.
Friday’s GDP data came as the country’s inflation eased to a 29-month low of 2.2 percent in June, leaving the government ample room to introduce more pro-growth measures to boost the slowing economy.
“As inflation moderated, I think there should be more policy relaxation to add to growth domestically and offset weakness in exports,” said Zhang Liqun, a researcher from the Development Research Center of the State Council.
The country has been steadily loosening fiscal and monetary policies. Last week, the central bank announced surprise cuts in the benchmark interest rates for the second time in a month this year to stabilize growth.
The central bank has also cut the reserve requirement ratio — the amount of cash banks are required to hold as reserves — three times since November, to bolster the economy.
Liu Ligang, an economist with the ANZ National Bank Limited, foresaw the central bank will slash the reserve requirement ratio three times in the rest of the year, with the first one likely this month.
Liu said China will increase investment in public housing, railway and infrastructure construction in the second half, as Premier Wen Jiabao said earlier this month that stabilizing investment currently plays a key role in expanding domestic demand and maintaining growth.
The country will also likely increase issuance of treasury bonds and local government bonds during the rest of the year, prompting the central bank to further ease monetary policies to inject liquidity into the economy, Liu said.