China's economy continued to decelerate in the second quarter of 2012 but will stabilize and recover in the second half this year with the help of stimulus measures, Standard Chartered said in a report released Monday.

The report, titled The Renminbi Insider, China's Better Half, said China's Gross Domestic Product (GDP) growth slowed to 7.6 percent year-on-year in the second quarter from 8.1 percent in the first quarter. However, measures to curb the downside have already been implemented -- notably, lower interest rates and more infrastructure spending -- which should result in a mild recovery in the third quarter.

Based on the figures released recently by the Chinese National Bureau of Statistics, fixed asset investment growth accelerated to 21 percent year-on-year in June from 20 percent in May, while retail sales remained robust at 13.7 percent year-on-year in June. The labor market is also solid.

"We believe this set of data supports our view that Q2 will be the slowest quarter for this year, but Q3 will only be marginally better," the report said.

Standard Chartered also expected further ease of onshore liquidity pressures in China, with the estimation of three more reserve requirement ratio cuts and one more interest rate cut in the second half.

"With lower interest rates and more infrastructure spending, we expect a gradual economic recovery in Q3 and a better second half for China. The economy will not coming roaring back, but it will at very least stabilize and should regain a little bit of momentum, " said the report.