China GDP growth has probably peaked after 7.8pc Q3 expansion

Economy expands by 7.8 per cent in third quarter, the fastest pace in a year

PUBLISHED : Friday, 18 October, 2013, 10:37am
UPDATED : Monday, 21 October, 2013, 12:43pm

The mainland economy has registered its fastest quarterly growth in a year, largely boosted by increased infrastructure spending and credit.

Though analysts say growth has probably peaked, markets reacted positively and the gains may help lay the foundation for the country's new leadership to deepen structural reforms with a plan expected at a meeting next month.

Gross domestic product expanded 7.8 per cent in the third quarter, in line with market expectations and at a faster pace than the 7.5 per cent in the second quarter and the 7.7 per cent in the first three months of the year, the National Bureau of Statistics said yesterday.

The rebound is believed by economists as likely to mark the top of the current recovery cycle. Keeping growth stable will help the leaders forge consensus for reforms in areas such as the finance sector and energy prices.

"The economic operation has been generally steady with favourable changes seen in the first three quarters. Main indicators have stayed in a reasonable range, which will be conducive to structural adjustments and reforms," the agency said.

Hong Kong and the mainland stock markets reacted positively to the economic growth. The Hang Seng Index closed 1.06 per cent higher yesterday at 23,340.1. The Shanghai Composite Index gained 0.24 per cent to 2,193.78.

The Communist Party's Central Committee holds a plenary session next month to discuss political and economic reform plans.

In the first three quarters, GDP expanded 7.7 per cent from a year earlier, higher than the annual target of 7.5 per cent growth.

Beijing has rolled out a raft of measures, including stepping up investment in railways and subways and removing some taxes for very small companies, in a bid to rejuvenate the economy.

But analysts say this investment-driven cycle may have peaked. "The 'bright spot' for markets since July is close to being over," said Bank of America Merrill Lynch.