China's H1 growth up 7.4%, showing economic resilience

A customer walks past a shop window at a department store in Hangzhou, capital of east China's Zhejiang Province, July 15, 2014. China's economy grew 7.4 percent year on year in the first half of 2014, the National Bureau of Statistics (NBS) announced on July 16. (Xinhua/Long Wei)

China's economy showed strong resilience in the first half of 2014, with growth momentum rebounding in the second quarter and expansion in the first six months reaching 7.4 percent year on year.

Helped by an export recovery since April, and new sources of growth emerging from the structural adjustment, expansion accelerated to 7.5 percent in the second quarter from 7.4 percent in the previous one, the National Bureau of Statistics (NBS) said on Wednesday.

"The Chinese economy showed good momentum of stable and moderate growth in the first half of the year," NBS spokesman Sheng Laiyun told a press conference.

STEADY, MODERATE GROWTH

New growth drivers have offset most of the negative drag from the country's property downturn and a serious adjustment in some heavy industrial sectors in the first half.

Sheng said China has been working to leverage the role of technology innovation in spurring growth and this has shown some effects, citing a boom in online sales and fast growth in the high-tech sector.

NBS figures showed that online retail sales jumped 48.3 percent year on year in the first half, reaching 1.14 trillion yuan (185 billion U.S. dollars).

Value added output of the high-tech sector grew 12.4 percent during the period, 3.6 percentage points faster than the average growth rate of all the industrial sectors.

Sheng also highlighted the expansion of the tertiary sector, which outperformed the primary and secondary industries during the period, leading to further improvement in the country's economic structure.

In the first six months, the added value of the tertiary industry accounted for 46.6 percent of GDP, 1.3 percentage points higher than the same period last year, NBS figures showed.

"It indicated a transition from industry-led growth to service-led growth in the Chinese economy," Sheng said. "It will bring profound and far-reaching implications to economic growth and the job market."

WEAK HOUSING MARKET

China's property market has been cooling since the beginning of the year, weighing on economic growth.

NBS data showed that property investment rose 14.1 percent year on year in the first six months, 2.7 percentage points down from the first quarter.

Floor space of commercial buildings sold during the six-month period dropped 6 percent year on year, and meanwhile, sales revenue of commercial buildings went down 6.7 percent from a year earlier.

"The adjustment in the property sector has become the biggest uncertainty in the Chinese economy," said Lian Ping, chief economist of the Bank of Communications

The downturn has hurt steel, cement and other producers and curbed sales of household electronics, furniture and other goods.

Kuang Xianming, director of the Research Center for Economy at the China Institute for Reform and Development, said an economic growth rate of 7.4 percent in the first half despite a slowdown in property investment growth showed that the Chinese economy is on track in becoming less dependent on the property sector.

In Sheng's view, the adjustment in the housing market will leave pressure on the Chinese economy, but in the long run, it is good for the healthy development of the sector and the sustained development of the national economy.

LOOKING INTO H2

Reform will continue to be on top of the government agenda in the second half, according to Kuang.

More measures on boosting private investment and unleashing the potential of domestic demand are expected to be introduced, and the macro-economic policy will be kept stable, he said.

"Favorable factors in the economic operation that we have observed will continue to lift growth momentum in the coming months, and economic expansion will be around 7.5 percent in the second half of the year," he said.

The central bank's fine-tuning, including a cut in rural banks' reserve requirement ratios, is expected to boost agricultural investment in the coming months, according to a note from Moody's Analytics.

The government's support measures such as increased rail investment will also push growth toward the full-year target, said the note.

Sheng warned that the domestic and international economic environment is still complicated and the national economy still faces many challenges.

China will continue to deepen reform, promote innovation, adjust economic structure and transform development patterns to consolidate growth momentum, Sheng said.