Together with the economic data for Q2 that is available to date, the most recent sentiment surveys suggest that the Chinese economy is picking up a bit of speed again. Both industrial production and retail sales recently showed a noticeable improvement. The export sector, on the other hand, is still sending out mixed signals. Although exports in May were up by 7% on a year earlier, this was preceded by very weak development, particularly in the first quarter of the year.
All in all, we expect the Chinese economy to show slightly stronger growth in the second half of the year than it did in the first six months. The export industry, for example, looks set to benefit from a revival in global trade. State infrastructure investments initiated at provincial level, in particular, will provide additional growth impetus. Our forecast of 7.4% average growth for this year as a whole remains unchanged.
Although our economic outlook for China is positive on the whole, there are still considerable risks hanging over this scenario. Structural change, local property bubbles, the lending boom and excess capacity in the industrial sector pose huge challenges for the Chinese administration and the country's economy. Moderate growth perspectives at a global level only make tackling these challenges even more difficult.