By Yawen Chen and Kevin Yao
BEIJING (Reuters) - China's economic growth is expected to top the government target to reach 6.6 percent in 2017, tempering initial worries of a sharper slowdown as Beijing walks a policy tightrope with its quest to crackdown on financial risks and limit damage to the economy.
An upturn in global demand for Chinese goods could cushion the impact on growth from curbs on property and debt risks, which have seen a modest tightening in monetary conditions, economists said.
The government has targeted annual growth of around 6.5 percent this year, down from the 6.7 percent pace clocked in 2016 - the slowest in 26 years - as authorities stepped up their campaign to wean the economy off its reliance on years of cheap credit.
Growth in the world's second-biggest economy is projected to continue cooling to 6.3 percent in 2018, the Reuters poll of 65 economists showed.
The forecasts for this year and in 2018 were both more optimistic than the polling results three months prior, as a slew of official data in recent months eased worries about a sharper downturn in China's economy.
"We raised our forecast because the economy has fared much better than expected in the first half of the year," said Betty Wang, a Hong-Kong based senior economist with ANZ Research.
China's economy grew a surprisingly solid 6.9 percent in the first quarter, buoyed by a gravity-defying property boom and higher government infrastructure spending which helped boost industrial output by the most in over two years.
However, the impact of a cooling property sector on economic growth is starting to show up, as fixed asset investment growth in May slowed more than expected.
TIGHTENING REGULATIONS
The Chinese government has sought to tame soaring property prices by slapping a flurry of restrictive measures, stoking fears of a market collapse as real estate is a major contributor to economic growth.
A regulatory crackdown on unscrupulous lending and a modest shift to tighter monetary condition have fueled funding costs, as authorities seek to contain a dangerous build-up in debt that has ballooned to 277 percent of gross domestic product.
Yet, policymakers have been treading captiously in tapping the brakes ahead of a key party meeting in the autumn at which there will be a change in the top leadership.
The People's Bank of China (PBOC) held back from matching a U.S. interest rate hike in June despite capital outflow pressures, and has injected liquidity into the market to avoid a credit crunch.
While growth in the second quarter is expected to have eased slightly according to the poll, solid exports in recent months have helped the economy weather tighter financial conditions.
Data on Thursday showed China's exports rose a stronger-than-expected 11.3 percent in June from a year earlier.
"There are actually overshooting risks in the second half even as growth is set to be slower," said ANZ's Wang.
On a quarterly basis, China's economy is expected to slow to 6.8 percent growth in the second quarter, 6.6 percent in the third and 6.5 percent in fourth quarter, the poll showed.
Still, analysts remain cautious about the longer-term economic prospects of the Asian giant. Property curbs and higher borrowing costs could gain more traction over the coming quarters.
"You don't feel the pain initially," said Julian Evans-Pritchard, China economist at Capital Economics.
"Companies can make do with less credit for now, but then lending starts to slow, as monetary conditions are still tighter, and that will eventually start to hurt," he said, adding that the transmission time could take up to nine months.
Analysts believe the PBOC will keep benchmark lending rates unchanged at 4.35 percent through at least the fourth quarter of 2018, the Reuters poll showed.
They have pushed back their expectations on a cut in the amount of cash that banks are required hold as reserves, or the reserve requirement ratio (RRR).
The central bank is expected to cut the RRR by 50 basis points (bps) in the first quarter of 2018 to 16.5 percent, versus the April poll's prediction for the 50 bps cut to be made in the fourth quarter of this year.
Analysts also expect annual inflation to be more muted at 1.8 percent in 2017, down from the actual 2 percent rate in 2016, probably reflecting a drag from low food inflation.
