China economic growth drops to five-year low of 7.3pc

Five-year low threatens full-year target as property sector slides further

PUBLISHED : Tuesday, 21 October, 2014, 10:54am
UPDATED : Wednesday, 22 October, 2014, 5:32pm

The mainland economy ran at its slowest pace in five years in the third quarter, and a further downturn in the sagging property sector has put the government's full-year growth target of 7.5 per cent at risk.

The 7.3 per cent year-on-year growth in the third quarter, while the slowest since the depths of the global financial crisis in early 2009, was broadly in line with market expectations, cementing the view that government policies will stay accommodative to support growth through the rest of this year.

Meanwhile, signs of recovery outside the property sector - growth in industrial output accelerated to 8 per cent in September from August's 6.9 per cent - mean few economists anticipate an outright stimulus package.

Instead, they see easing steps adopted so far by Beijing - including relaxations of restrictions on homebuyers and credit injections into selected banks - being extended to help build growth momentum in the final quarter.

"The worst period for economic operation may have fallen in July and August, while monthly figures showed growth had rebounded last month," HSBC economist Ma Xiaoping told the South China Morning Post. "However, property investment remains the biggest downside risk in the economy."

The data sent the CSI 300 index of top shares in Shanghai and Shenzhen down 0.9 per cent.

The government has pursued targeted measures to spur growth, eschewing a repeat of the 4 trillion yuan stimulus injected into the economy in 2009, which economists largely blame for inflating the housing bubble Beijing has battled since.

Measures introduced in 2010 to cool the property market are the root cause of the slump in the sector. Restrictions have repeatedly been eased to try to arrest the decline in an industry that directly affects about 40 other sectors of the economy.

Real estate investment grew 12.5 per cent in the January to September period from a year earlier, cooling from 14.1 per cent in the first half and near 20 per cent at the start of the year.

Fixed-asset investment rose 16.1 per cent in the first nine months versus 17.3 per cent in the first half. Growth in retail sales also slowed, rising 11.6 per cent in September against 11.9 per cent in August.

Sheng Laiyun, spokesman at the National Bureau of Statistics that published the data, blamed the third-quarter slowdown on a high base of comparison, structural adjustments to cut excess capacity and the prolonged property market correction.

But he said over 10 million new jobs were created in the first nine months, meeting the government's annual target three months earlier than forecast.

Premier Li Keqiang has said gross domestic product growth a bit faster or slower than the target of "about 7.5 per cent" would be acceptable, citing comfort from a stable job market.

But Alaistair Chan, Sydney-based economist at Moody's Analytics, said the risks to achieving the target were rising.

"It will be a stretch for China to meet its 7.5 per cent GDP target this year, and the target for 2015 is likely to be lowered further," he wrote in a note to clients.