China GDP Growth Hits Target while Industrial Production Tops Consensus

China's gross domestic product growth accelerated to the government target rate in the second quarter positively surprising markets, helped by higher government spending and special measures to boost the property market.

The economy grew 7.5% in the three months to June on a year-on-year basis, the National Bureau of Statistics said on 16 July. Analysts had been expecting a growth of 7.4%, unchanged from Q1.

Also, the year-over-year measures of industrial production and urban investment exceeded market forecasts, in June and in the six months to June, respectively.

The industrial production growth came in at 9.2% from 8.8% in May versus consensus of 9.0% while urban investment - which refers to the total amount spent on activities in construction and purchase of fixed assets - grew 17.3% topping market forecast of an unchanged reading of 17.2%.

Analysts expect the government to continue the supportive measures as they are seen necessary to keep the growth rate at or above the 7.5% mark.

China had increased spending in railways, cut taxes and reduced banks' reserve requirements in order to increase credit availability for some sectors, and the Q2 data shows that the measures have been productive.

Market Reaction

Asian stocks and Australian dollar have not reacted positively to the Chinese data as Fed chief Janet Yellen's testimony on 15 July strengthened the US dollar broadly.

An expanding China should strengthen the Aussie dollar as a significant chunk of Australia's export earnings is from the world's second largest economy.

Yellen's positive remarks in front of the Senate banking committee on Tuesday about the labour market and progress of the US economy were considered a slight tilt to the hawkish side when compared to the dovishness of the 18 June FOMC, sending the USD index to a 20-day high.

The MSCI Asia Apex ex Japan index, a free-float adjusted market capitalisation-weighted index that is designed to track the 50 largest stocks in the Asia ex Japan, was down 0.24% at 5:00 GMT.

AUD/USD traded at a 13-day low of 0.9335 on Wednesday, down 0.37% from Tuesday's close.