China Q2 growth likely around 7.5 pct - govt think tank

CHINA-ECONOMY-GROWTH:China Q2 growth likely around 7.5 pct - govt think tank

China's economy may have grown around 7.5 percent in the second quarter and nearly 8 percent in the first half, and will recover steadily in the second half as policy stimulus gains traction, a senior economist at the cabinet's think-tank said on Thursday.

The assessment comes a day before China reports its second quarter growth rate. The think tank's view roughly matches a Reuters poll, which forecast that for April-June, the economy expanded 7.6 percent from a year earlier - the slowest pace since the first quarter of 2009.

"The economy is likely to stabilise and even recover modestly in the second half as such policy measures show results," Yu Bin, director of macro-economic research department of the Development Research Centre (DRC), told a news conference.

"Growth in the first half was close to 8 percent," he said.

In the first quarter of 2012, China's economy grew 8.1 percent from a year earlier.

Yu predicted the economy could grow around 8 percent in 2012. The government aims for annual growth of 7.5 percent.

The world's second-largest economy is entering a phase of more modest expansion relative to the 10 percent annual average rate in the past three decades, but it could still maintain a 7-8 percent annual rate in the next 10 years, Yu said.

China's central bank unexpectedly cut interest rates last week for the second time within a month in a bid to bolster growth. The second cut sparked some fears that the economy may be slowing more sharply than earlier expected.

Beijing has also lowered banks' required reserves three times since November 2011, each time by 50 basis points, freeing an estimated 1.2 trillion yuan for lending.

Data on Monday showed annual consumer inflation slowed to slightly more than expected to 2.2 percent in June, giving Beijing more scope to ease policy without stoking price pressures.

"Falling consumer inflation creates room for monetary policy easing," Yu said.

"But if China's growth picks up in the third quarter and the world economy shows a modest recovery, the room for further cuts in RRR and interest rates will narrow significantly," he added.

Some analysts hope growth will pick up in the third quarter but others predict sluggish growth if the government fails to spur domestic demand to offset weakening exports caused by recession in Europe and a patchy recovery in the United States.

Yu said the government needs to stimulate infrastructure investment to ensure economic growth on is track, echoing Premier Wen Jiabao's remarks this week that boosting investment will be crucial for stabilising growth.

China's exports are likely to grow about 10 percent this year, Yu said, adding that a recovery in China's economy will point to steady strengthening of the Chinese yuan.