China Reports 6.9% Q2 GDP Growth, Stocks Fall On Regulation Concerns

China reported better-than-expected Q2 GDP growth of 6.9 percent on Monday, slightly topping consensus analyst expectations of 6.8 percent growth. However, language from a major meeting on economic policy has investors worried that China may soon begin tightening its financial regulations.

After concerns over slowing growth in China rocked global financial markets in late 2015 and early 2016, the latest GDP growth number from China suggests the world’s second-largest economy is well on track to meeting its full-year growth projection of 6.5 percent.

China’s Q2 growth was driven by strong numbers in exports and production, with the steel industry being a particular high point.

But Chinese stocks closed lower on Monday and the iShares FTSE/Xinhua China 25 Index (ETF) FXI was down 0.5 percent in midday trading after a political meeting held once every five years in China revealed Chinese politicians seem particularly concerned about risk and regulations.

Notes from the meeting, which included President Xi Jinping, included the word “risk” 31 times and the word “regulation” 28 times, sending mixed signals to investors.

“In general, we expect GDP growth to remain robust in the second half, but slower than the first half, due to the high base,” Citi said on Monday. “Looking ahead, uncertainty remains on investment and trade.”

Related Link: A Steadier Course For China ETFs

China has established the State Council Financial Stability and Development Commission, which will serve to oversee and regulate the financial industry in China and maintain financial stability. There were little details provided about exactly how the new committee will operate, but traders are speculating that it will serve as a “super-regulator” body in China.

Despite the market jitters on Monday, the FXI ETF has more than doubled the return of the SPDR S&P 500 ETF Trust SPY so far in 2017.