Jul 16, 11:49 PM EDT

China's economic growth held steady in the latest quarter, boosted by unusually strong trade, despite concerns of a slowdown in the world's second largest economy

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BEIJING (AP) -- China's economic growth held steady in the latest quarter, boosted by unexpectedly strong trade and consumer spending, despite fears tighter lending controls aimed at cooling a surge in debt are weighing on commercial activity.

Output rose 6.9 percent in the three months ending in June from a year ago, data showed Monday. That was in line with the previous quarter and better than many forecasts.

Communist leaders are eager to keep growth steady as they head into a ruling party congress at which President Xi Jinping is due to be reappointed as leader later this year. But the economy faces headwinds as Beijing clamps down on lending to rein in a surge in debt that has fueled fears it might harm the financial system or drag on growth.

Forecasters expect the economy to cool as those controls depress investment, the biggest component of growth in recent years.

"The economy appears to have ended Q2 on a strong note," said Julian Evans-Pritchard of Capital Economics in a report.

"This strength seems unlikely to last, however," he wrote. "The recent crackdown on financial risks has driven a slowdown in credit growth, which will weigh on the economy during the second half of this year."

The International Monetary Fund has forecast China's full-year growth for 2017 to hold steady at last year's level of 6.7 percent. The IMF raised its outlook twice this year, citing strong government spending.

The government's growth target is 6.5 percent "or higher if possible."

Consumer spending and trade growth both accelerated during the second quarter, helping to offset softening investment in factories, real estate and other fixed assets.

Retail sales rose 10.4 percent in the first half of the year, up 0.1 percentage points from the first quarter's rate, according to the National Bureau of Statistics. Factory output rose 6.9 percent in the first half, up 0.1 percentage points from the first quarter rate and 0.9 percentage points better than the same time last year.

Trade data released earlier showed export growth accelerated in May and June, at least temporarily averting concern about possible politically dangerous job losses in trade-related industries that employ millions of people.

Investment rose by 8.6 percent in the first half of the year, but that was down from 0.6 percent from the first quarter's expansion.

Private sector analysts cite surging debt as the biggest potential risk to China's long-term economic stability.

China has relied on infusions of credit to prop up economic growth since the 2008 crisis. Total nongovernment debt rose from the equivalent of 170 percent of annual economic output in 2007 to an estimated 260 percent last year, unusually high for a developing country.

The Moody's rating agency cut Beijing's credit rating May 25 and the IMF urged Beijing on June 14 to get debt under control.

Regulators have cited reducing risk in China's financial system as a priority this year. Banks have been told to look closely at borrowers, especially those trying to make acquisitions abroad, to ensure they can manage their debts.

The country's top economic official, Premier Li Keqiang, tried to quell fears with a speech last month at the World Economic Forum in the northeastern city of Dalian. Li said financial risks are "generally under control" and Beijing can achieve this year's development targets.

At a weekend meeting of the Chinese leadership on financial strategy, Xi called for the state-dominated financial system to "prevent and contain financial risk." He called for financial services to "go back to the origin" and focus on "serving the real economy" instead of supporting speculation.

Analysts said that is likely to lead to creation of new regulatory structures, though a report issued following the meeting called for "appropriate sequencing," suggesting Beijing might move more slowly than some reform advocates want.

"We do not foresee major opening moves" on easing controls on China's currency or allowing money to move into and out of the economy more easily, said UBS economist Tao Wang in a report.


National Bureau of Statistics (in Chinese): www.stats.gov.cn

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