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Chinese Q2 GDP has just been released, and it’s beaten expectations.

According to the National Bureau of Statistics (NBS), the economy grew by 6.7% year-on-year in the June quarter, topping expectations for an expansion of 6.6%.

After seasonal adjustments, the economy expanded by 1.8% during the quarter, again beating expectations for growth of 1.6%. The increase in the March quarter, previously reported at 1.1%, was revised up to 1.2%.

Growth in China’s tertiary industries – predominantly services – increased by 7.5% to 18,429 billion yuan in the first half of the year, outpacing growth in secondary (13,425 billion yuan) and primary industries (2,209.7 billion yuan) of 6.1% and 3.1% respectively.

Combined, the value of GDP in the first half of the year stood at 34,063.7 billion yuan, up 6.7% from the same period in 2015 at comparable prices.

“The national economy has achieved moderate and steady development,” said the NBS. It also stipulated that the government would push through with supply side reforms and look to develop new growth engines.

It also stated that consumption accounted for 73.4% of GDP growth during the half, suggesting — on face value at least — that the economy’s transition towards growth powered by consumption and services continues to strengthen.

“The value added of the tertiary industry accounted for 54.1 percent of GDP, 1.8 percentage points higher than the same period last year, 14.7 percentage points higher than that of the secondary industry,” said the NBS.

On the industrial sector, it noted that “the efforts of cutting overcapacity, reducing inventory, deleveraging, lowering costs and strengthening weak links have achieved notable results”, adding that “in the first half year, the output of coal and crude steel decreased by 9.7 percent and 1.1 percent year-on-year.”

Keeping with theme seen in recent years, the NBS also acknowledged that “domestic and external conditions are still complicated and severe and the downward economic pressure remains”.

Like the GDP figure, most of the monthly data reports also impressed, with the exception of fixed asset investment.

Compared to a year earlier, industrial output grew by 6.2%, higher than the 6.0% level of May and forecasts for a deceleration to 5.9%. It was the fastest growth seen since March.

Retail sales also beat, rising 10.6% compared to forecasts for growth of 10.0%. It marked the fastest year-on-year growth seen since December 2015.

The one outlier came from fixed asset investment which grew 9.0% between January to June compared to the same period a year earlier. Markets had been looking for growth of 9.4%, following a 9.6% increase reported in May.

After an initial burst of activity in the early parts of 2016, annual growth in fixed asset investment now stands at a fresh multi-decade low.

As was the case when the previous GDP report was released, the People’s Bank of China also released monetary aggregates for June, with those too beating across the board.

New bank lending rose by 1.38 trillion yuan, a figure well ahead of forecasts for an increase of 1.04 trillion yuan. From a year earlier the level of outstanding bank loans rose by 14.3%, topping expectations for an increase of 14.0%.

In May new loans totaled 985.5 billion yuan, leaving the year-on-year increase at 14.4%, fractionally above the level seen in June.

Total social financing – the broadest measure of liquidity that captures lending from non-traditional sources – also accelerated, rising from 659.9 billion yuan in May to 1.63 trillion yuan.

M2, or broad money that includes cash in circulation and bank deposits, increased by 11.8% from June 2015, the same pace seen in the year to May but ahead of forecasts for an expansion of 11.5%.

Financial markets have responded positively to the news, an unsurprising outcome given it’s as close to a “Goldilocks” scenario as one can get.

Growth, driven by consumption and services, remains firm, with infrastructure investment and industrial activity playing an increasingly diminished role in the economy.

Of course, such a rosy outcome will likely be met with a degree of scepticism from many in financial markets, as will the rapid increase in credit growth.

Still, for the moment, it’s risk on in Asia, aside from markets in China. Good news is bad news, it seems. We’ll see if that lasts.

The AUD/USD is currently up 0.39% at .7658, leaving it trading at the highest level seen in ten week’s. The Japanese yen is also weaker, down 0.78% against the US dollar.

All major stock markets, aside from those in China, are higher, while bond markets are trading softer.

Interestingly, commodities are weaker, perhaps undermined by the lower chance of additional stimulus being delivered to the Chinese economy.

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