BEIJING: China’s gross domestic product (GDP) expanded in the third quarter at its slowest pace since the depths of the global financial crisis, official data showed Tuesday, but analysts said the world’s second-largest economy may have bottomed out.
The 7.3 percent year-on-year increase in July-September was lower than the 7.5 percent expansion in the previous three months, the National Bureau of Statistics (NBS) said, and the slowest since the 6.6 percent in the first quarter of 2009.
However, it exceeded the median forecast of 7.2 percent in an AFP survey of 17 economists.
China’s economy—a key driver of global growth—is suffering from a deflating property bubble, a crackdown on corruption and weak demand from Europe, prompting authorities to introduce monetary easing measures.
While the headline figure will likely add to concerns about the world economy, officials were quick to put a largely positive spin on it.
The economy showed “good momentum of stable growth” in the first three quarters, said NBS spokesman Sheng Laiyun, with “progress made and quality improved”.
But he acknowledged the third-quarter slowdown was partly due to “unexpectedly greater pains brought by the structural reform” which included “still pronounced overcapacity in traditional industries” and a correction in the property market this year.
“The internal and external environment is still complicated and the economic development still faces many challenges,” he said.
The NBS said GDP expanded 7.4 percent in January-September, and Sheng said growth had remained in a “reasonable range” as, among other factors, job creation was stable.
China’s official 2014 growth target is about 7.5 percent in March, the same as last year, though officials including Premier Li Keqiang have openly stated it could come in lower.
The analysts polled by AFP forecast growth of 7.3 percent this year, unchanged from the previous estimate three months ago but slower than actual growth of 7.7 percent in 2013.
“The momentum of the economy bottoming out and stabilising is now relatively clear,” Ma Xiaoping, a Beijing-based economist for British bank HSBC, told AFP. “Currently there’s no risk of an accelerated slowdown,” she added.
The NBS also said industrial production, which measures output at factories, workshops and mines, rose 8.0 percent year-on-year in September, against a more than five-year low of 6.9 percent in August.
“This is encouraging, as of all the monthly data, industrial production has the strongest correlation with GDP growth, so this bodes well for an economic recovery this quarter,” Nomura economists wrote in a reaction note to Tuesday’s data.
Retail sales, a key indicator of consumer spending, expanded 11.6 percent, while fixed asset investment, a measure of government spending on infrastructure, rose 16.1 percent on-year in the first nine months.
However, Liu Dongliang, of China Merchants Bank, said the GDP figure was “a result of multi-rounds of mini-stimulus measures, showcasing that the pressure of the economic downturn is still relatively high”.
Authorities have since April used a series of measures to underpin growth, on a far smaller scale than the 4.0 trillion yuan (now $660 billion) stimulus of 2008 introduced to battle the effects of the global financial crisis.
Beijing has so far used targeted cuts in reserve requirements—the amount of funds banks must put aside—as well as a 500 billion yuan injection into the country’s five biggest banks for re-lending.
Analysts are divided over whether the central People’s Bank of China might resort to an across-the-board reserve requirement cut or even slashing interest rates.
The government still has weapons in its arsenal, including greater infrastructure spending and tax cuts, while easier mortgage lending polices announced last month could take the sting out of falling housing prices, they say.
Declines in average new home prices in 100 major cities accelerated in September, dropping for the fifth straight month, the most recent figures show.
But leaders have indicated that lower growth is the new normal as they carry out long-awaited economic reforms and transform the country’s growth model to one driven by consumer, rather than investment.
“The upshot is that although growth has slowed, it reflects a welcome rebalancing away from excess investment in certain sectors of the economy and is not cause for significant concern,” Julian Evans-Pritchard, China economist at Capital Economics, said in a note.
“With policymakers now prioritising employment and economic rebalancing over growth, we don’t think they will feel the need to act aggressively to shore up the economy in response to today’s data.” AFP