Wen Jiabao says Chinese economy 'relatively good' as key Q3 GDP data due

Premier Wen Jiabao said the country's economic situation last quarter was "relatively good", but some experts still fear the bears could be back.

"China's economic growth has started to stabilise," Xinhua cited Wen as saying in meetings he held between October 12 and 15 with industry leaders, company executives and some local government officials.

Wen was quoted yesterday as having said the economic situation last quarter was "relatively good" and that the government will continue to show "positive changes".

His statements are seen by some as a signal that today's report on gross domestic product may show the country's slowdown is ebbing.

However, experts who previously thought growth rates below 8 per cent were unthinkable are now falling over themselves to issue forecasts for China that are edging perilously close to 7 per cent - the level at which a hard landing supposedly starts becoming probable rather than possible.

The third-quarter gross domestic product figures to be released today are widely expected to reflect the impact of the euro-zone sovereign debt crisis and a faltering economic recovery in the United States.

People's Bank of China deputy governor Yi Gang said last week in Tokyo that China's economy would probably grow by 7.8 per cent this year, and economists queried it.

"This is a view that I find too optimistic," Mizuho Securities chief economist Shen Jianguang said. "Given the government's policies implemented so far, I believe this will be a challenge."

In recent weeks both the World Bank and the Asian Development Bank have cut full-year growth forecasts for China.

The World Bank cut its full-year forecast to 7.7 per cent from 8.2 per cent, and pruned its 2013 forecast to 8.1 per cent from 8.6 per cent previously.

Experts polled by Reuters earlier this month now expect 2012 to be China's weakest full-year growth since 1999, at just 7.7 per cent.

The Reuters poll forecasts annual growth of 7.4 per cent in the third quarter, down from 7.6 per cent in the second quarter.

The major question preoccupying markets and economists is whether a rebound is in sight.

Capital Economics was cautious, saying today's data might "suggest the economy has stabilised rather than started to recover".

Liu Ligang, head of Greater China economics for Australia and New Zealand Banking Group, was also cautious, saying China was likely to bottom out in the fourth quarter.

Morgan Stanley is forecasting that growth slowed to 7.3 per cent in the third quarter from 7.6 per cent in the second. However, fixed-asset investment and retail sales growth could come in higher in September, it said.

Additional reporting by Bloomberg