China’s GDP Shocks with a Higher Print

China’s economy seems to be steadying as a number of key data released today beat forecasts. June retail sales, industrial production and the second quarter gross domestic product (GDP) all came in higher than expected.

The world’s second largest economy grew at seven percent in the second quarter beating expectations of 6.9 percent. Industrial output printed at a 6.8 percent rise in June, beating six percent and retail sales jumped 10.6 percent, above the expected 10.2 percent.

China’s National Bureau of Statistics thanks stabilization and recent monetary policy steps for the better than expected numbers. “The vitality of the economic development was strengthened,” it said in its English-language release. “However, we must be aware that the domestic and external economic conditions are still complicated, the global economic recovery is slow and tortuous and the foundation for the stabilization of China’s economy needs to be further consolidated.”

They also claim these numbers are not inflated and that they we were “hard fought” and a result of good policy. Analysts often doubt data and accuracy out of China.

Data coming out of China, as of late, has been a relative mixed bag. Last month the official manufacturing PMI came out at 50.2 in June. This was no change from the month before and just above the contraction/expansion level of 20. The final HSBC/Markit PMI showed contraction at 49.4 for the same month. In May, the number came out at 49.2.

Investors have been concerned about slowing economic growth on the mainland which has forced policy makers in Beijing and the Peoples’ Bank of China (PBOC) to take action last month. In June the PBOC cut interest rates as well as the reserve requirement ratio (RRR) in a bigger than expected easing package. This was Beijing’s fourth round of major actions this year as concerns are rising that the country will miss their “around” seven percent growth target. The last time the PBOC cut both the main lending rate and the RRR in the same month was in December of 2008 as the Global Financial Crisis was at its peak.

China’s equities have also taken a beating with the Shanghai and Hang Seng sinking. These stock markets have shed 24 percent since touching a 52 week high. We saw panic selling set in and investors took capital out of the Chinese markets. Some stability has set back in, shoring up sentiment, even though the Shanghai is down over two percent at the time of this report.