China economy slows for seventh quarter
UPDATED @ 11:30:43 AM 18-10-2012
October 18, 2012
China’s continued slowdown has confounded forecasters repeatedly this year. — Reuters pic
The National Bureau of Statistics said GDP grew 7.4 per cent in the third quarter from a year earlier — in line with forecasts from economists polled by Reuters — the first miss of the official target since the first quarter of 2009’s 6.5 per cent.
Industrial production, retail sales and investment data were all slightly ahead of forecasts, however, and quarter-on-quarter GDP growth was strong, suggesting the worst may be over and the world’s No.2 economy will pick up in the final quarter — as a once-a-decade leadership transition gets under way in Beijing.
“Growth this quarter should be back above 8 per cent,” said Kevin Lai, an economist at Daiwa, in Hong Kong. “The worst should be over. We are seeing better numbers in industrial production and retail sales.”
Riskier assets reacted positively, with Asian shares outside Japan rising to a 7-month high, while the Australian dollar, sensitive to Chinese demand for industrial commodities, touched its highest in two weeks.
While GDP growth at 7.4 per cent would be cause for joy in recession-stalked developed economies, it represents a sharp slowdown for China, where GDP grew 9.2 per cent in 2011 and has averaged an annual rate near 10 per cent for three decades.
Fixed-asset investment rose 20.5 per cent in January-September from a year earlier, ahead of the 20.2 per cent consensus forecast, although still down from around 25 per cent seen for most of last year.
Consumption also quickened, with retail sales in September expanding by 14.2 per cent year-on-year, ahead of the 13.2 per cent forecast, which would have been unchanged from August.
Growth in factory output came in at 9.2 per cent, slightly ahead of both the 9.0 per cent forecast and August’s 8.9 per cent.
Real estate investment, which affects more than 40 other sectors from cement and steel to furniture, rose 15.4 per cent in the first nine months of 2012 from a year earlier, slowing from an annual increase of 15.6 per cent in January-August.
“The September data indicates economic momentum has picked up strongly compared with July and August,” said Zhang Zhiwei, chief China economist at Nomura in Hong Kong.
“New project investment picked up further in September, indicating infrastructure investment will continue to rise in coming months. This data set helps reinforce our view that growth will rebound visibly in Q4.”
The government targets growth of 7.5 per cent for the full year — reduced in 2012 from the previous 8 per cent target — and the consensus forecast of economists polled by Reuters is that it will deliver on it, with an expansion of 7.7 per cent.
Indeed, Premier Wen Jiabao was quoted by local media as saying yesterday that the economic situation in the third quarter was relatively good, and the government was confident of achieving its goal.
But the remorseless slowdown has confounded forecasters repeatedly this year, with the initial consensus call for growth to bottom in the first quarter being persistently beaten back to its present position of a trough in the third quarter followed by a mild uptick in the fourth quarter.
Some analysts cite electricity usage growth running at roughly half the average rate of the last five years as a manifest sign of economic malaise.
Others disagree. They say there is clear evidence that the financial system’s liquidity taps have been opened wide and that fine-tuning policies — Beijing’s mantra for a year now — are gaining traction.
The fine tuning includes two interest rate cuts, three cuts to the proportion of deposits banks must keep as reserves — freeing an estimated 1.2 trillion yuan (RM580 billion) for lending — and approvals in the last month for infrastructure projects worth about US$157 billion, although Beijing has not said explicitly where the money to fund them is coming from. — Reuters
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