Forecasts for mainland growth cut below 10pc

Economists have trimmed their forecasts for the mainland's economic growth this year to less than 10 per cent, after the country reported a sharper than expected slowdown for the third quarter on Monday.

The world's fourth-largest economy grew 9 per cent year on year in the July-September period, the slowest pace in five years, on smaller gains in industrial output and exports.

Growth was 9.9 per cent in the first nine months, slightly higher than the 9.8 per cent average since the country launched the reform and opening policy in 1978, according to the National Bureau of Statistics.

That prompted JP Morgan to cut its real gross domestic product growth forecast for this year to 9.6 per cent from 10.1 per cent, China International Capital Corp to 9.7 per cent from 10 per cent and Merrill Lynch to 9.9 per cent from 10 per cent.

Morgan Stanley said there were downside risks to its recently revised 9.8 per cent forecast.

Economists said a growth rate of less than 7 per cent would mean a hard landing for the economy, and their forecasts for next year were moving closer to that level.

CICC predicts 7.3 per cent growth for next year, Morgan Stanley's forecast is 8.2 per cent, Merrill Lynch's is 8.6 per cent while JP Morgan has a higher estimate of 8.7 per cent.

'The slowdown was sharper than suggested by trends in consumption, investment and exports, leading us to believe that de-stocking (falling inventory) was a main driver of the deceleration,' said Wang Qing, an economist at Morgan Stanley.

'It seems the well-telegraphed financial crisis in the developed markets hurt sentiment among Chinese producers, before the shock actually hits the real economy.'

For the first nine months of this year, industrial output increased 15.2 per cent, down 3.3 percentage points from a year ago. Growth was 11.4 per cent last month, a six-year low.

Even if Beijing launches aggressive stimulus measures, economists said they might not be enough to spur further consumer spending to support economic growth.

Retail sales rose 23.2 per cent last month, beating expectations. For the first nine months, retail sales grew 22 per cent, up 6.1 percentage points year on year.

'The strong consumer performance may be credited to still stable employment and household incomes. But the continued weakening in trade and related industries, as well as the potential declines in home values present major risks to spending,' said Ken Peng, an economist at Citigroup.

On the brakes

The economy faces a hard landing if growth falls below 7 per cent

Economic growth in the third quarter was the slowest pace in five years, at: 9%