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China Q2 GDP expected to show steady economic deceleration, with reforms in focus

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With its second-quarter growth figures due Friday, China has been careful to prep markets for further signs of a gradual deceleration in the world's second-largest economy.

Chinese premier Li Keqiang said this week that the the Chinese economy was "basically stable," which was read as a signal second-quarter growth would be near the first-quarter level of 6.7 percent.

This followed comments by Li on July 4, reported by state media agency Xinhua, that it was "not easy" to achieve Q1's 6.7 percent growth rate and that the economy would show "continued steady development."

Most analysts are looking for more downside than upside in the three months to June 30, on the back of domestic factors including an ongoing austerity drive, as well external factors such as the declining after the U.K.'s vote to exit the EU.

Major risk factors to second-quarter growth included overcapacity in the heavy industry sector and slowing global demand for Chinese products.

Qilai Shen | Bloomberg | Getty Images

Barcelona-based FocusEconomics said it expected growth to have "moderated slightly" in the second quarter as the effects of policy stimulus unveiled at the end of 2015 faded.

In particular, investment in the real estate sector slowed in May, and state-owned enterprises accounted for the bulk of new investment during Q2, while private business investment remained weak, FocusEconomis head of economic research Ricard Torne wrote in a recent report. This was sparking concerns about the quality of growth in China, he added.

"Although this year's policy action signaled that authorities will prevent any sharp slowdown, the economy is expected to gradually decelerate in the coming quarters," Torne said.

"While slower growth will partially reflect a healthy domestic rebalancing, mounting economic imbalances and weak global demand have the potential to increase turbulence in China's expected soft-landing."

Helen Zhu, head of China Equities at BlackRock, said she did not expect any major upside surprise, nor a contraction in the headline number, but that the economy had not yet bottomed.

With Beijing's target compound annual growth rate at 6.5 percent for the next five years, that meant there would be times when the figure will be "noticeably below that", she told CNBC's "Halftime Report" on Wednesday.

Zhu said to expect a 20 to 30-basis point drop in GDP each quarter going forward. A basis point is 1/100th of a percentage point.

There's no need for great concern, though, she added.

"I don't think we need to focus that much in terms of the growth. Most of the opportunities in China are really about the structural reforms and all of the major changes they are doing to the economy," she said.

Indeed, China's Li also said Wednesday that the country was committed to continued efforts to tackle steel overcapacity.

But despite Chinese leaders' cautious statements ahead of the Q2 growth data, and its focus on reform, there has been speculation that the economic giant may join the ranks of various central banks in cutting interest rates to boost growth.

"It makes more sense for China to cut interest rates," Hao Zhou, Commerzbank's senior emerging market economist for Asia, told CNBC's "Squawk Box" on Monday.

"China is talking about supply-side reforms but I think China needs to stimulate on the demand side," he added.

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