China sent chills across markets earlier this month when official figures showed it had grown at just 7.6 percent in the second quarter, the slowest pace in three years.
But, economists say, the next quarter will offer much better prospects as the measures taken by Beijing to boost growth, like the recent cuts in interest rates and in banks’ reserve ratio requirement, filter through to the real economy. Analysts polled by Reuters see economic growth picking up to 7.9 percent in the third quarter and to 8.2 percent in the fourth quarter.
“The most hopeful story is the Chinese new bank loan growth – strong in May, strong in June,“ Renaissance Capital’s chief economist Charles Robertson told Emerging Markets.
The pace of lending by China’s big four state-owned banks doubled in the first half of July from a month earlier, Reuters reported, citing the state-run Shanghai Securities News on July 18.
In June, total lending by Chinese banks reached 919.8 billion yuan ($144 billion), according to central bank data.
“We’d expect the money to be spent in the second half; we’d expect that to give some support to Russia and South Africa,” Robertson said.
Analysts at Capital Economics noted that the economic slowdown in the second quarter was due to declining export growth and weakness in real estate investment – but added that the volume of property sales “has started to recover recently and prices are edging up too.”
“But a significant rebound in prices seems unlikely, since developers’ inventories of unsold property are high and still rising,” they added.
Inflation is “easing faster than expected, providing sufficient room for further policy easing ,” HSBC’s Gary Evans wrote, adding that “stimulus measures are being implemented both on the monetary side and the fiscal side.”
But a rebound in China is likely to be short-lived, unlike in 2009, Capital Economics analysts warn.
“There is less space for a credit-fuelled investment boom now than four years ago and less appetite too, since the costs to financial stability and local government finances are better understood,” they wrote.