China's GDP predicted to hit 7.5% in 2Q

Monetary policy unlikely to tighten, says analyst.

According to DBS, 2Q GDP is projected to grow 7.5% YoY, in line with the government’s growth target. DBS reckons anything above 7.0% is deemed acceptable to the government, as China needs only 7.0% growth on average to double GDP per capita by 2020.

Here's more:

No stimulus is expected unless growth dips below that. Monetary policy is unlikely to tighten as CPI hasstayed consistently low at 2.4% for both 1Q and 2Q.

Economic performance has worsened in 2Q. Exports and imports grew 3.8% and 5.0% respectively versus 18.4% and 8.6% in 1Q. The trade surplus of USD65.7 billion was narrower than 2Q12’s 68.4 billion.

Fixed assetinvestment growth has been slowing since the beginning ofthe year, asthe government tightens controlsthe property market and off-balance sheet lending.

Loan and M2 growth have also slowed to 14.1% and 14.0% respectively in 2Q from 14.9% and in 15.7% 1Q. FAI growth is expected to be 20.2% in June, down from 20.4% in May and 20.9% atthe end of 1Q. Retailsales growth issetto slow from 1Q amidst ongoing emphasis on frugality.

It is impossible to time the growth rebound because China is undergoing a structural transition. That said, not all structuralreforms depress growth. Policies supporting urbanization will bolster growth somewhat. We await a clearer blueprint on this.

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