– Louis Kuijis, RBS economist
Chinese economy reported better than expected industrial production and retail sales on a year-on-year basis, therefore suggesting that the stimulus by Beijing has had its effect on the economy. However, analysts expect that further stimulus is needed to sustain this positive trend and ensure the GDP growth target of 7% for 2015. Industrial production rose 6.8% year-over-year in June, compared with the 6% forecasted, and 6.1% gain in May. Meanwhile, the retail sales in June grew an annualized 10.6%, versus the expected rise of 10.2%. The total retail sales for the previous month reached 2.428 trillion yuan, while the total sales of consumer goods in the first six months reached 14.157 trillion yuan.
Concerns over slowing economy and selloff in Chinese stocks, has led the Chinese government to react and add stimulus to the economy, as the People's Bank of China cut key interest rates and reserve requirement ratio for some banks late last month. Economist are worried that a further selloff in Chinese equities could impact GDP growth by as much as 0.2% to 0.3% in the following quarters. Global economic recovery is key for China's economy to stabilize, as the world's second largest economy depends heavily on its exports; however, an eye must be kept on domestic factors as well.
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