China’s economy posts steady growth of 6.7 per cent in third quarter, but growing headwinds expected
GDP expands at same rate as in previous two quarters, with investment in real estate gaining steam
China’s economy expanded 6.7 per cent from July to September, the same rate as in the previous two quarters, the government’s statistics agency said on Wednesday.
The figures will help ensure Beijing can achieve a minimum 6.5 per cent economic growth rate this year, reducing the need to roll out short term stimulus measures.
Economists, however, are expecting growing headwinds for China’s economy over the coming year, with curbs imposed on the housing market and signs of weaker growth in industrial output.
The growing expectation of an interest rate increase by the US Federal Reserve in December has also added momentum to capital outflows out of China and poses challenges for economic policymakers, analysts said.
Zhou Jingtong, a senior researcher at the Bank of China, said the stabilisation in China’s economy came as no surprise and that it was mainly boosted by the recovering housing market, pro-growth measures implemented earlier this year and the pick-up in global commodities prices.
“However, in the future, the economy is still under huge pressure with growing uncertainties in external demand, cooling measures on housing prices’ gains in major cities and the ongoing need to shut down obsolete capacity,” Zhou said.
Investment from real estate gained steam in the third quarter, while data on retail sales were within market expectations, according to National Bureau of Statistics data.
Industrial output figures were worse than analysts expected.
Property investment posted 5.8 per cent growth in the first three quarters after seeing a 5.4 per cent gain during the first eight months.
Investment from the private sector, a recent policy focus, improved, growing 2.5 per cent in the first three quarters, up from 2.1 per cent from January to August.
Overall investment in the economy rose 8.2 per cent in the first three quarters, up from an 8.1 per cent rise in the first eight months of the year.
Industrial output rose 6.1 per cent in September, down from 6.3 per cent in August.
Retail sales in September grew 10.7 per cent, compared with 10.6 per cent in August.
Zhou Hao, a Commerzbank economist, said in a research note that with weak demand overseas for China’s goods and services and disappointing trade data, the stabilisation in China’s economy was largely due to improving domestic demand, especially in the property and car sectors.
“Looking ahead, we think that the cooling measures in the property market will weigh on China’s economy over the coming quarters,” he said.
Julian Evans-Pritchard, China economist at Capital Economics, wrote in a note that the recent recovery was ultimately on borrowed time given that it had been driven in large part by faster credit growth and a property market boom, both of which policymakers were now working to rein in.
“As the boost from policy stimulus begins to wear off – probably at some point early next year – continued structural drags mean the economy is set to begin slowing again,” Evans-Pritchard said.
Statistics bureau spokesman Sheng Laiyun tried to play down the hit from the housing curb.
Sheng said at a briefing in Beijing on Wednesday that such measures were “necessary, timely and effective” as authorities aimed to avoid sharp movements in the housing sector.
He said the impact on the economy as a whole of short-term hits in the housing sector still needed monitoring.