MNI DATA ANALYSIS: China Econ Shows Upside Amid Slowest Growth

     BEIJING (MNI) - China's economy decelerated to 6.2% y/y in the second

quarter from 6.4% in Q1, lower than 6.3% projected by an MNI survey. It was the

slowest since at least 1992 according to available official record. All other

indicators however performed better than expected, giving policymakers

confidence of achieving targets without excessive stimulus.

     With the first half of the year registering the GDP having expanded 6.3%

y/y, only a growth below 5.8% in H2 would prevent China attaining the official

annual target of 6-6.5%, said ANZ in a report. It noted that Beijing won't allow

growth to fall below 6%, given that President Xi Jinping pledged to celebrate

the 70th anniversary of the founding of the People's Republic with "outstanding

economic performance." Growth may come in at 6.1% in 2019 if it expands by 6% in

H2, ANZ projected.

     Mao Shengyong, the spokesman of the National Bureau of Statistics also said

at a briefing on Monday that there is strong support for the H2 to achieve the

full-year economic targets, with a series of countercyclical measures kicking

in.

     --CAR SALES JUMPED

     Retail sales soared to 9.8% y/y in June, after growing 8.6% in May from

April's 16-year low of 7.2%. It surpassed the 8.3% forecast in the MNI survey

and reached the highest level since March 2018.

     The acceleration was mainly driven by car sales, which jumped to 17.2% y/y

from May's 2.1%, due to the clearance of old inventory before a new emission

standard implemented in July. This boosted the headline retail sales growth by

1.6 percentage points, according to Mao.

     E-commerce promotions in June encouraged the sales of cosmetic products and

home appliances, Mao said.

     --STABLE INVESTMENT

     Fixed-asset investment rose 5.8% y/y in Jan-June, beating 5.5% MNI forecast

and 5.6% in the first five months.

     Property investment fell for the second month to 10.9% from 11.2% in

Jan-May, higher than 9.5% gain in 2018.

     Though developers' funding, housing starts, and home sales decelerated by

0.4, 0.4, and 0.2 pp respectively, property investment is expected to stabilize

at the current level throughout H2, and continue to underpin the economic

growth.

     As an important driver of growth, infrastructure investment grew by 4.1%

y/y from 4.0% in the first five months. It is likely to "rebound from a low

level" in H2, given increased issuance of local government special-purpose

bonds, Mao said.

     China's new policy allowing local government to use proceeds from special

bonds as project capital will help local infrastructure building.

     Manufacturing investment improved for the second month to 3% y/y from

Jan-May's 2.7%. It may rise slightly in H2 if the China-U.S. trade war doesn't

escalate again, as manufacturing earnings have shown signs of stabilizing amid

the tax and fee cuts, CICC said in a report.

     Industrial output growth accelerated to 6.3% y/y in June, up from May's

5.0%, beating 5.2% MNI projection.

     Industrial output showed resilience in H1 even as holidays and tax cuts

caused more monthly swing, Deng Haiqing, the chief economist at WallstreetCN,

said in a report. June's strengthening output was consistent with the increased

electricity and coal usage, he said. Output rose 6% y/y in H1, the same rate as

in Q3, 2018, and higher than 5.7% in Q4.

--MNI Beijing Bureau; +86 (10) 8532-5998; email: wanxia.lin@marketnews.com

--MNI Beijing Bureau; +86 10 8532 5998; email: william.bi@mni-news.com

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