NEW YORK ( TheStreet) -- Stock markets around the world are seeing gains early in the week, propelled, in large part, by relatively strong GDP figures out of China. For the second quarter, Chinese growth was reported at 7.5%, stoking bullish optimism in the market and softening concerns of deceleration in world's second-largest economy.
The S&P 500 is once again pressuring its all-time highs and the Shanghai Composite Index (SHCOMP) is trading near its best levels for the month. This is the second straight quarter of slowing expansion, but the in-line print was still interpreted as a positive, given recent comments from China's leadership suggesting a willingness to accept weaker growth prospects.
But how accurate is the report? Are there reasons to believe that the data are inflated? The numbers indicate that declining trade activity and official measures to contain bank lending have taken effect, and that the country is now on a trajectory to post growth rates of below 8% for the foreseeable future.
Recent comments out of Beijing prepared markets for a negative outcome, as signs of distress are building. The government's target growth rate for 2013 is now 7.5%, which, if realized, would be the lowest expansionary rate in more than 20 years.For potential investors, declining headline growth should be taken alongside the recent turmoil that has been seen in Chinese stock markets, which show strong bearish moves in a year of global recovery. Together, this suggests that risk in both the real goods and financial sectors is one the rise, and that investors with exposure to companies in the country should consider reducing that exposure.