China Q2 GDP seen steady at 7.4%, recovery in sight

A worker examines a pumpjack at a PetroChina oil field in Panjin, Liaoning province June 30, 2014. [Photo/Agencies]

China's economy probably steadied in the second quarter with annual growth holding firm at 7.4 percent, a Reuters poll showed, suggesting that a recovery is taking hold as a flurry of government stimulus measures kick in.

All but three of the 21 analysts polled by Reuters predicted that growth either stabilized or edged up between April and June, reinforcing the view that authorities have successfully arrested a cooldown with a modest loosening in policies.

Indeed, even though economists expect the headline growth rate to cling to an 18-month low of 7.4 percent, they also believe that China's export and manufacturing sectors likely enjoyed their best performances in several months in June.

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"We expect China's upcoming June and second-quarter data to show an economy that is still recovering," UBS analysts said in a note to clients.

"With more easing measures underway and an ongoing export recovery, sequential growth momentum should warm up further in the third quarter."

Exports are forecast to rise 10.6 percent in June from a year ago, faster than May's 7 percent expansion and the best showing in five months. Imports likely snapped back into positive territory, growing 5.8 percent, after May's 1.6 percent drop.

Growth in China's trade sector has gained traction in recent months, helped by an improving US economy and as the government gave exporters more tax breaks, credit insurance, and currency hedging options.

Manufacturing output, which accounted for 45 percent of China's gross domestic product in 2012, is forecast to have grown 9 percent in June, up a shade from May's 8.8 percent.

Faced with the need to cut China's dependence on exports and investment for growth, Beijing tried earlier this year to convince investors it is willing to slightly miss its annual growth target in exchange for better-quality growth.

But authorities seem to have since changed their minds after weak data early in the year.

Premier Li Keqiang said last month that he expects the 2014 GDP growth target of 7.5 percent to be met or exceeded and vowed the economy would not suffer a hard landing.