China's economy stabilizing against headwinds

Meanwhile, industries like computer and telecommunications equipment, information and software, transport, postal service, cultural and sports goods all posted an investment growth above 20 percent year on year.

Property investment, the old pillar of investment and growth, is also expected to recover in the second half, with house sales warming up. Fewer cities saw new home prices drop for the fourth consecutive month in June.

The pressure on home prices will continue to ease gradually through 2015, global rating agency Moody's said in a research note.

Recovery expected, pressure remains

The trend that China's economy is stabilizing has become more obvious, Jia Kang, a renowned fiscal science researcher at the Ministry of Finance, and his fellow researchers wrote in an article published Wednesday.

As interest rates come down and monetary supply increases, Chinese companies will see the cost of investment brought down effectively and the nation's fixed-asset investment growth will hopefully rebound in the fourth quarter, according to the article.

Retail growth has basically touched the bottom and will keep stable throughout the year, Jia predicted.

Foreign trade, another growth engine, is likely to return to growth in the second half as global demand improves and de-stocking by companies winds down, he wrote.

Zhu Haibin, chief economist of JP Morgan China, attributed growth in the second quarter to the service sector's performance. Consumption accounted for 60 percent of economic growth in the first half, 5.7 percentage points higher than a year ago and almost double the contribution from investment.

"The economic re-balancing from investment to consumption is really happening," Zhu said in a research note, predicting the economy will continue to pick up in the third quarter.

However, the degree and duration of recovery is challenged by several factors, including hovering industrial overcapacity, long-standing fiscal restraints, and the latest stock market turmoil, according to Zhu.

Stock price corrections may drag down growth in the financial sector and affect some rapidly expanding industries that have benefited from previous bullish runs, Zhu said.

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