Growth in 2013 likely for China economy: Moody's

Thanks to increased investment that will lead to heightened production and growth rebound in third quarter.

According to Moody's Analytics, the Chinese economy has now entered a cyclical upturn. Increased investment will lead to increased production and a rebound in growth in the third quarter. Growth in 2013 is likely to come close to trend.

Here's more from Moody's:

China's economic cycle reached a trough in the second quarter, and an increasing array of data show that conditions are now gradually improving. Monetary and fiscal stimulus measures are evidently restarting the investment cycle, which will drive production in the near term.

Although a soft landing is expected, risks are tilted to the downside. Policy was on a tightening cycle until mid‐2011. The global environment deteriorated in the second half of 2011, undermined by the U.S. debt‐ceiling fiasco and the worsening situation in Europe. This depressed China's exports, increased manufacturer pessimism, and slowed hiring. Soon afterward, the government began shifting away from inflation concerns and back toward supporting growth.

Monetary easing began with reserve ratio cuts in November, followed by a 1.4% depreciation in the yuan against the dollar in May and interest rate cuts in June and July; this ensured an ample supply of credit. Meanwhile, the government accelerated approvals of various investment projects, restarted rail construction, and continued to build low‐cost housing. All this boosted demand for credit, as seen in the monthly new yuan lending numbers 

There are, however, some near‐term downside risks to our baseline forecast, principally Europe and the Chinese property market. If Greece leaves the euro zone in a disorderly fashion, the financial contagion effects could lower China's GDP growth to 5% y/y before it slowly recovers.