As reported last night, China pleasantly surprised watchers when it reported its latest data dump, including a stronger than expected 6.7% Q2 GDP print and unchanged from the previous quarter, which beat across the board with the exception. The reason for the beat: a buoyant property market and government stimulus boosted demand for factory output. On the other hand, fixed-asset investment, traditionally the biggest driver of Chinese growth, and which includes both infrastructure and manufacturing investment, grew at only 9%, its slowest pace since 2000 in the first six months and down from 9.6 per cent in the year to May.

“The most important data point in today’s release is private investment, which accounts for 62 per cent of total investment but continues to see zero growth in June.” Larry Hu, China economist at Macquarie Securities. “Whether private investment can turn round in the coming months is the key to the Chinese economy in the second half.”

Breaking down the GDP components, we find that investment contributed only 2.5% points to GDP growth in the first half, down from 2.9% last year, while the consumption contribution rose from 4.2% to 4.9%.This, of course, is a number which can not be indenepdently verified from the traditionally opaque and data-fudging National Bureau of Statistics.

To be sure, as Capital Economics said last night, China GDP should be taken with a grain of salt given the political nature of the data and pressure to meet official 6.5%-7.0% growth target. China’s economy probably only expanded 4.5% in 2Q rather than official figure of 6.7%.

More worrying was that net exports subtracted 0.7%, in yet another confirmation that global trade continues to deteriorate.

Also troubling: China’s industrial economy continues to suffer from rampant overcapacity and deflation. Mining grew 0.1% in the first half, while electricity, heat and water production grew 2.6%.Facing a bleak demand outlook, privately owned manufacturers have cut spending on new factories, contributing to the sharp slowdown in fixed investment. But a surge in infrastructure investment by state-owned enterprises has taken up the slack, supporting demand for commodities such as steel, copper and cement.