ISM Associates: Asian stocks rise on better-than-expected economic growth in China
Asian stocks rose on news that China’s economy grew at a slightly better-than-expected rate in the second quarter of 2016. Increased government infrastructure spending contributed to an annualized 6.7% expansion compared to expectations for 6.6% print in the world’s second biggest economy.
Growth in China has been a source of persistent jitters among investors worried that the country’s role as the chief engine of global growth after the 2008 financial crisis was in danger as it continued its efforts to rebalance its economy to reflect a greater reliance on domestic demand rather than exports.
James Preston, Chief Economist at ISM Associates said, “This data lends weight to arguments that the Chinese economy is stabilizing after a few years of declining GDP but there are doubts over whether the stabilization is sustainable. Most of those doubts center on the growing stresses becoming evident in the country’s sizeable shadow banking system.”
China’s statistics bureau also published industrial production and retail sales data that pointed to more buoyancy in the economy. Industrial production came in at an encouraging 6.2% compared to consensus forecasts for a 5.9% reading while retail sales rose by a robust 10.6% against expectations for a 10% increase.
ISM Associates says that while it remains bullish overall on China’s economic outlook, it harbors concerns about the extent of corporate debt which threatens to overshadow progress made on reorientation of the economy.
“Corporate debt is at around 145% of the country’s GDP and is a legacy of the government’s efforts to boost economic growth by spurring lending,” said Preston.
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