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China's local GDP data points to recovery, rebalancing

By Aileen Wang and Koh Gui Qing

BEIJING (Reuters) - China's regional economies enjoyed a revival in growth in the second quarter, data from provincial governments showed, chiming with earlier figures that suggest a burst of government stimulus measures is re-invigorating activity.

Of the 30 regions and provinces that released their local gross domestic product (GDP) data, 23 reported first-half economic growth accelerated from the first quarter.

About three-quarters posted growth that was higher than the national average of 7.4 percent in the first six months.

Growth also diverged sharply between eastern and western China. The coastal and northeastern regions fared the worst, while activity was most buoyant in the central and western areas, where double-digit growth rates were concentrated.

Analysts said this suggested China's bid to rebalance its economy is paying off.

From redefining job targets to shifting investment to inland areas and cutting obsolete capacity in energy-guzzling sectors in the north, China wants to overhaul the world's second-largest economy and encourage more sustainable and higher-quality growth.

"The growth gap is an expected result of Beijing's efforts to rebalance regional economies and let the fruits of growth be more evenly shared by the poorer inland regions," said Nie Wen, an analyst at Hwabao Trust in Shanghai.

For a table of regional GDP data, please click on

In Hebei -- China's top steel producer -- for instance, GDP growth stayed sluggish in the first six months, even though activity picked up slightly to 5.8 percent compared with 4.2 percent in the first quarter.

Hebei's drowsy performance is in part due to its efforts to remake itself. Hebei wants to slash total steel capacity by 60 million tonnes by 2017 and to shut more outdated steel mills this year to cut air pollution in northern China.

Similarly in the northeastern Heilongjiang province, the only province that has not released its GDP data, a local statistician who declined to be identified said first-half GDP growth was likely to be the lowest in China at under 5 percent.

A hub for China's heavy industry and a major coal producer, Heilongjiang was also the weakest performer in the first quarter, when its GDP growth fell to 4.1 percent.

INLAND REGIONS OUTPACING

In contrast, economies in the west such as Chongqing, Guizhou and Qinghai all posted double-digit GDP growth between January and June, helped by policy support. Just last month, Premier Li Keqiang had vowed to sink more cash into the industries and infrastructure in western China.

"Most of Beijing's recent piecemeal pro-growth measures have targeted the central and western provinces," Nie said.

Meanwhile, the biggest export-oriented provinces of Guangdong and Zhejiang saw GDP growth slacken in the first-half of 2014 to between 7 percent and 7.5 percent.

Cooling growth along China's eastern coast is in line with Beijing's goal of cutting its economic reliance on exports in favor of a more sustainable expansion in domestic consumption.

Data earlier this month showed China's economic growth quickened to 7.5 percent in the second quarter, as a raft of stimulus measures helped lift the pace from an 18-month low of 7.4 percent between January and March.

Still, a Reuters poll this month found that China's economy is forecast to grow 7.4 percent this year, the slowest pace in 24 years, and many economists believe more government measures may be needed to maintain its momentum.

In eastern Shandong province, growth edged up to 8.8 percent in the first half from 8.7 percent in the first quarter, but strains are evident from the earlier slowdown in growth, government efforts to reduce excess capacity and a cooling property market.

The amount of bad bank loans in the province surged 25.8 percent between January and June this year, the official Financial News reported last week.

Many economists see the property slowdown as the key risk to national and regional economies this year. A growing number of cities and local governments have eased restrictions on property purchases in recent months to shore up revenues and boost economic activity.

(Editing by Kim Coghill)

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