The Chinese economy ended the first half of 2017 on a solid note, comfortably beating what is required to achieve the government’s full-year target of 6.5 per cent.
Data for second-quarter gross domestic product, released early this week, showed the economy expanded at a respectable clip of 6.9 per cent, well ahead of market expectations. While annual growth was level with the first quarter, sequential growth accelerated on a quarter-on-quarter basis, suggesting the economy has, if anything, gained further momentum following the usual seasonal pattern.
Besides the solid headline print, the details of the data also revealed some encouraging signs. Most noticeably, the structure of the economy has continued to improve, with growth rebalancing towards more sustainable sources.
Second-quarter GDP data showed that the services sector had made up the largest part of the Chinese economy, commanding a 52 per cent share
According to the official data breakdown, household consumption accounted for close to 70 per cent of GDP expansion in the second quarter. Its share has risen by 13.5 percentage points over the past two years. At the same time, the investment share in the economy has fallen from 35.8 per cent to 32.6 per cent, suggesting a clear rebalancing from investment to consumption has taken hold. Even though this process has been accompanied by a slowdown in headline growth, the rebalancing – away from credit-intensive investment – is needed to take the economy off its debt binge.
Progressing hand-in-hand with rising consumption, the economy has also become more services-oriented. Second-quarter GDP data showed that the services sector had made up the largest part of the Chinese economy, commanding a 52 per cent share, and its growth had continued to outpace that of the manufacturing and agricultural sectors. Compared to a typical developed economy, where the services sector usually accounts for two-thirds of growth, China still has plenty of room to grow its tertiary sector, meeting the demand of its burgeoning middle class.
Promoting growth in the services sector is also positive for improving…