China cheers after bubbly Q2 GDP

By Simon Rabinovitch and Zhou Xin

BEIJING (Reuters) - China looks set to hit its full-year growth target of 8 percent after a surprisingly strong second quarter notable for a surge in investment driven by powerful fiscal and monetary stimulus.

Annual gross domestic product growth accelerated in the second quarter to 7.9 percent from 6.1 percent in the first quarter, making China the best-performing major economy and reinforcing hopes that the world economy is pulling out of its deepest recession in 80 years.

Economists had forecast 7.5 percent growth, and several promptly responded to Thursday's figures by raising their projections for this year and next.

"We see clear upside risks to our current GDP growth forecast of 8.3 percent for 2009," said Yu Song and Helen Qiao at Goldman Sachs. They said the second quarter's 7.9 percent growth translated into a 16.5 percent pace compared with the first quarter when expressed as a seasonally adjusted annualised rate.

A string of accompanying data for June from the National Bureau of Statistics depicted an economy successfully making up for a slump in exports through domestic demand, especially capital spending, generated by a 4 trillion yuan (356 billion pounds) pump-priming package and record bank lending.

"It's very encouraging: the 8 percent growth target is in sight," said Daniel Soh, an economist at Forecast in Singapore.

"It's by now clear that the fiscal stimulus package has offset the contraction in export activity,"

Tokyo shares hit a one-week high and shares elsewhere in Asia powered to their highest level in a month as the Chinese data buoyed hopes for a global recovery.