The GDP, reported by the National Bureau of Statistics in Beijing, grew a healthy 7.5 percent, higher than the 7.4 percent estimated by analysts surveyed by Bloomberg. But an individual analysis of business sectors shows deteriorating sales and consumer confidence.
"All of them are pointing in the opposite direction from this supposed G.D.P. number," said Leland Miller, the president of China Beige Book International, a New York data service that surveys 2,200 private businesses across China each quarter to gauge economic activity.
Chinese Premier Li Keqiang's government increased spending in railway infrastructure, reduced reserve requirements for some lenders and even cut taxes to achieve this growth. China has had to deal with a drop in property construction and weak home prices.
"The government will continue to support the key sectors it is supporting now but will not expand to sectors they are not encouraging," said Zhu Haibin, chief China economist at JPMorgan Chase & Co. in Hong Kong.
Major drivers of China's growth story, such as construction and other investment in the private sector, have begun to taper, exports have just begun to recover after a winter slump and retail sales aren't very encouraging. Government investment is strong, boosted by increased lending by the state-owned banking system to local government, national railroad system and state-owned companies.
Figures released on Tuesday by the central bank, the People's Bank of China, show that lending has accelerated fastest in June, meaning that total lending now outpaces economic output.
While on most counts China has beat analysts' estimates, many say that there are underlying problems that will continue to hold back the economy, including dwindling investments and a slump in the housing sector.
Asian stocks held steady on account of the encouraging news coming out of China. The Shanghai Composite fell 0.2 per cent and Hong Kong's Hang Seng rose 0.3 per cent after the Chinese government released growth data. Australian and New Zealand markets also remain largely unchanged.