China's economy expanded more than expected in the second quarter of the year, Beijing said today, fuelling hopes growth may be stabilising, but analysts warned private investment was worryingly low.
The world's second biggest economy grew 6.7 per cent year on year in April-June, slightly quicker than forecast in an AFP survey and the same as the year's first quarter.
The result is also in line with the government's 6.5-7.0 target for the full year and will provide some relief as China -- and key driver of the global economy -- suffers its worst rates of growth for 25 years.
"The national economy has achieved moderate but steady and sound development," National Bureau of Statistics spokesman Sheng Laiyun said.
However analysts said much of the expansion was driven by state investment in infrastructure and credit growth, suggesting it may be hard to maintain in the longer-term.
Markets were unmoved by the figures, with Shanghai's composite index ending the day flat.
"China is on track of achieving this year's growth target," said Zhu Haibin, JP Morgan China chief economist. But he added that "investment continues to be on the weak side, especially private investment".
After decades of breakneck growth policymakers claim to be embracing weaker expansion as a trade-off for structural reforms to wean the country off cheap exports and massive government spending in favour of domestic consumption.
But the latest figures show the transformation is proving tough, with mounting debt a key concern for global investors.
Fixed asset investment, a gauge of infrastructure spending, rose nine per cent in the first half of the year following a record credit binge in the first quarter aimed at stimulating the economy.
New bank loans jumped to nearly 1.4 trillion yuan in June, the central bank said today, up dramatically from around one trillion the previous month, as borrowers took advantage of loosened lending standards put in place by Beijing.
Investment by private businesses grew by less than three percent in the first half of the year, the data showed, with Sheng blaming overcapacity in traditional industries, barriers for private firms to enter some sectors, and limited access to loans.
Tom Rafferty of the Economist Intelligence Unit said the "greatest concern" is the slide in investment by private firms, in a sign businesses are worried about the wider economy and Beijing is "failing to deliver on promised market reforms".
"Levels of state investment we have seen are not sustainable if the authorities are at all serious about curbing debt risks.
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"More importantly, China has created over 50 million urban new jobs in the past four years," Li noted.
He also said China will not see nor allow massive unemployment of particular groups.
He admitted that the country, which has successfully created over 13 million new urban jobs annually for four consecutive years, does face significant pressure from job creation this year, and underscored that ensuring employment was of paramount significance to a country of 1.3 billion population.
The government has set a higher employment target of 11 million new urban jobs this year, one million more than last year's target.
Li said that some 7.95 million students will graduate from Chinese universities and colleges and some five million from secondary vocational schools.
He drew particular attention to laid-off workers resulting from efforts to address overcapacity, which could near one million this year, as the process moves from the sectors of coal and steel to thermal power.
He also said workers who lose their jobs due to overcapacity cuts to explore the opportunities in emerging sectors.
The government helped some 720,000 laid-off workers find new jobs last year, he said.
"The government's job is to create a good environment and the necessary conditions for people to use their own wisdom and hard work to generate golden opportunities for themselves," he said.
He also promised government assistance to help meet the basic needs of those struggling to find work.
A total of 100 billion yuan (about USD 14. 5 billion)of special funds have been allocated from the central fiscal to assist the resettlement of those laid-off workers.
Li also said China's mass entrepreneurship and innovation initiative has a strong vitality as in the last three years over 40,000 new market entities got registered every day on average.
The government needs to exercise careful regulation in an open-minded and accommodating way to enable the healthy development of new business forms boosted by the initiative, he said.
China has a labour force of 800 million, among whom 170 million have received higher education or possess high professional skills.
They represent a tremendous source of generating wealth and energy, and represent enormous opportunities for China itself and the international market, Li said.
