China's GDP growth over the first half of the year was probably overstated due to a frenzy of IPOs, bond issuance, and stock market volatility. The overstatement was a result of a financial sector growth surge anomaly this year, and not intentional manipulation. Although, Beijing was probably happy with the anomaly.
The chart below shows GDP growth rates for the first half of 2015 by sector. Notice that financial intermediation was up a blistering 17.4% from the previous year. We should expect financial services to grow fast in the current reform environment. But, 17.4% is probably an abnormal rate of growth, especially now that IPOs have been suspended and the massive stock market-mania has most likely subsided.
GDP Growth Rates in H1 2015 by Sector
In 2014, the financial sector made up 7.4% of the economy. A 17.4% growth rate this year would mean that the financial sector contributed 1.28% to the GDP growth.
But, what would that contribution be in a more reasonable environment? 2014 saw a financial sector growth rate of 10.2%. If we apply 10.2% growth to 7.4% of the economy, the contribution is 0.75%.
So, in the first half of the year we saw a possible 0.5% transient extra boost to the growth rate. If we strip out the financial sector distortion, underlying GDP growth was probably closer to 6.5% (the 7.0% stated rate less 0.50% anomaly).
A 6.5% underlying growth rate would imply that the PBOC will probably introduce more easing measures, and Beijing will speed up spending measures in order to get underlying growth back up to 7%.