China's GDP Stabilizing, BlackRock's (BLK) Zhu Tells CNBC

China's growth this past month is not a trend that will continue says BlackRock's (BLK) Zhu who perceives a "drift down" coming for GDP.
By Michael Sheetz ,

NEW YORK (TheStreet) -- China's economy is experiencing a much-needed but quiet period of growth, as the Shanghai Stock Exchange is up more than 8% in the last month.

Head of China Equities at BlackRock (BLK) - Get Report Helen Zhu, believes the gains are a stabilizing of the economy, rather than a sign of continued growth.

"We basically need to have enough employment and social stability to push ahead on social reforms and aim for better quality and not just quantity of growth," Zhu said on CNBC's "Halftime Report" on Wednesday. "We're seeing a gradual return of interests, or at least less negative news and less worry about immediate blowup."

China will soon report its second quarter GDP and Zhu is not "looking for either a big upside surprise or a major contraction." She believes that the results should be in line with analyst expectations after the first quarter saw a GDP percentage in the "mid-6s," which she says does not mean "the economy had bottomed.

"For the next five years, the target is 6.5%, implying there will be periods upcoming when it will be noticeably below that, so I think we're probably going to gradually drift down," Zhu noted.

Additionally, Zhu thinks investors looking for opportunity in China should not focus on growth but rather on "the structural reforms and major changes they're doing to the economy."

She notes supply-side reforms "as one of the key things" this past year, saying sectors like steel and coal are "massively overcapacity sectors that are filled with so-called zombie SOE companies that aren't necessarily competitive."

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