The National Bureau of Statistics said growth had slowed from 8.1pc in the first quarter of the year. In 2011, China’s gross domestic product (GDP) grew by 9.2pc.
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The Chinese government has been determined to cool growth, after the exuberance of 2009 when it pumped nearly 14 trillion yuan (£1.4 trillion) of stimulus money and new bank loans into the economy to safeguard China from the financial crisis.
In the wake of that acceleration, inflation rose from less than 3pc in July 2010 to a high of 6.5pc last July. It has since fallen back to 2.2pc last month. The property market, meanwhile, gave every impression of being a bubble ready to burst.
China’s leaders have now promised to stop focusing on the speed of economic expansion and instead on the “quality” of growth, in a bid to rebalance the economy away from low-end manufacturing and heavy investment and towards consumption and services.
However, the speed at which the economy slowed in the wake of tighter monetary policy and property market regulations has surprised many observers, who worry about a “hard landing” in the only major economy in the world that is still showing healthy growth.
Ren Xianfang, an economist at IHS Insight, said in a note that the speed of the deceleration resembled the aftermath of the Asian Financial Crisis of 1997.
She added: “The length of consecutive quarterly GDP growth deceleration is even longer than the slide following the Asian Financial Crisis, six straight quarters, versus five in the Asian Financial Crisis”.
China’s export market has been hit particularly hard by the malaise in the United States and Europe, with growth falling to 9.2pc in the first half, compared with 24pc in the first half of 2011. The property market in several major cities has also cooled significantly; confidence in the manufacturing sector has fallen; inventories have risen.
In response, the government now appears to have shifted back to a pro-growth policy, making two surprise cuts to interest rates in less than a month. Bank lending grew strongly in June, and investment seems to have picked up considerably.
Wen Jiabao, the Chinese premier, said this week that as a “large developing economy”, China needed to “maintain a certain speed of growth”. He promised to fine tune policy in the face of a “relatively large” downward pressure on growth and suggested more investment is on the way.
Hong Kong share prices rose 0.6pc in the immediate wake of the release of the figures, with Industrial & Commercial Bank of China, the world’s biggest bank, rising 1.3pc. However, the Shanghai index, which briefly rose, fell back by 0.2pc an hour after the figures were released.