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Stock Strategist

False Dawn in China

The country's GDP uptick comforted many investors. It shouldn't have.

Many investors breathed a sigh of relief with China's second-quarter GDP release, which reported that the economy expanded 7.5% from the prior-year period. That was up from 7.4% in the first quarter of 2014, itself a floor that China hadn't breached since the global financial crisis.

The consensus interpretation is that China has emerged from a cyclical trough and is back on track to meet the government's 7.5% full-year growth target. According to this view, Beijing's "mini-stimulus" worked. Growing public outlays aimed at infrastructure and social housing (and aided by looser credit) offset a moribund real estate market and external headwinds.