Flash Notes-China: 2Q14 GDP Report Shows Growth Gathering Momentum

China’s economic growth pace quickened in 2Q14, with headline coming in at 7.5%y/y from 7.4% in 1Q14. Accelerationof the q/q figures is even more evident, rising a seasonally adjusted 2%q/q, a turnaround from 1.5%q/q gain in 1Q14.

    The headline figures are also consistent with other monthly releases, which are benefitting from the targeted looseningfrom PBoC as well as increased public spending on infrastructure sector, and these conditions should remain favourableinto second half of 2014.

    Taking into account of all these, we are upgrading our forecast for China’s GDP growth for 2014 to 7.6% from ourprevious forecast of 7.3%. For 2015, we are also ratcheting up our projection for China to 7.5% from 7.3% previously.

    The positive story on China’s growth consistent with our view on the RMB, and we reiterate our end-2014 forecast of6.15/USD and 6.03/USD for end-2015.