Lu's viewpoints were backed up by Royal Bank of Canada economist Brian Jackson: "I think this (data) does increase the chance that we'll have more rate hikes." He expects one more rate hike in the third quarter, but says there could even be more than one.
The latest rate hike of 25 basis points, the third hike this year, was announced on July 6.
Meanwhile, HSBC is expecting two more reserve ratio hikes in the third quarter, but said that should be enough to slow credit growth to a normal rate. Currently, commercial banks are required to keep 21.5 percent of their deposits in reserve to rein in excess lending, which is at a record high.
China has been struggling to fight inflation against fears that the economy could slow too sharply. Some investors even worried that Beijing's consecutive tightening measures may choke the economy or pose a risk of a hard landing, which would lead to destructive consequences. The Shanghai Composite Index declined 10 percent from its April high through Tuesday, a day before the data was released.
However, Wednesday's data suggest that steady and rapid economic growth will help the government continue its tightening of monetary policies and further control surging consumer prices. "The drivers of China's economic growth are relatively strong, and the risk of a fast slowdown in economic growth is relatively small," Shen said.
Shen's view was shared by economists, who said that moderation is likely a part of a healthy cooling rather than a hard landing. Qu Hongbin, HSBC’s Greater China Chief Economist, said, "We believe this kind of slowdown is necessary for China to contain inflationary pressure. There's no need for people to worry about a hard landing in China's growth."
Industrial output, a key gauge of industrial production, advanced 14.3 percent in the first half, and rebounded unexpectedly in June, rising 15.1% from a year earlier compared with 13.3% in May, according to the agency.
The strong manufacturing data further assuaged doubt of the nation's economic prospects. "The economic growth data is quite upbeat, as industrial production was noticeably stronger than expected," said Xu Biao, an economist with China Merchants Bank in Shenzhen.
Moreover, fixed-asset investment, excluding rural households, rose 25.6 percent in the first half from a year earlier, Wednesday's data showed. Retail sales expanded 17.7 percent last month from a year before exceeding a median analyst estimate of 17 percent. Real estate development and investment amounted to 2.62 trillion yuan in the first half, an increase of 32.9 percent year-on-year.
Home price growth rates in most cities slowed down in June, Shen said. The excessive growth of housing prices, as well as the speculative demand on houses, has been curbed, he argued.
Chinese stocks climbed Wednesday after the economic data were released. The Shanghai Composite Index increased 1.48 percent to 2,795.48 points.
