China’s growth slows fur­ther

The Myanmar Times - - International Business -

CHINA’S growth slipped to a sev­enyear low of 6.6 per­cent in the third quar­ter, ac­cord­ing to an AFP sur­vey, de­spite am­ple stim­u­lus and a red­hot prop­erty mar­ket in the world’s sec­ond-largest econ­omy.

The me­dian fore­cast for ex­pan­sion in gross do­mes­tic prod­uct (GDP), based on a poll of 18 economists, rep­re­sents an eas­ing from the sec­ond quar­ter’s 6.7pc.

It would be the slow­est quar­terly growth since the first three months of 2009, in the mid­dle of the global fi­nan­cial cri­sis.

As the world’s big­gest trader in goods China is cru­cial to the global econ­omy and its per­for­mance af­fects part­ners from Aus­tralia to Zam­bia.

GDP ex­panded 6.9pc in 2015 – its weak­est in a quar­ter of a cen­tury – and the Chi­nese gov­ern­ment has tar­geted growth in a range of 6.5-7pc for this year.

The AFP poll fore­cast China will just meet the goal, with the me­dian full-year pre­dic­tion at 6.6pc.

“Our ex­pec­ta­tion is that growth will con­tinue to slow. The largest head­wind on the hori­zon is the hous­ing sec­tor, which peaked in April 2016 and thus is now in the cor­rec­tion phase of its cy­cle,” Brian Jack­son of IHS told AFP.

Bei­jing is try­ing to ex­e­cute a dif­fi­cult struc­tural tran­si­tion away from de­pen­dence on low-end ex­ports and heavy in­dus­try to­ward con­sump­tion and ser­vices, but en­trenched in­ter­ests have slowed progress.

At the same time, au­thor­i­ties have sought to com­bat a slow­down through hefty fis­cal stim­u­lus and loose home-buy­ing poli­cies that have fu­elled prop­erty mar­ket booms in ur­ban ar­eas.

“Eco­nomic growth in the third quar­ter was bet­ter than mar­ket ex­pec­ta­tions,” Rong Jing, a Bei­jing­based an­a­lyst with BNP Paribas, told AFP, but pointed to pos­si­ble risks aris­ing from the real-es­tate boom.

“The prop­erty bub­ble risk will con­tinue to bal­loon if the gov­ern­ment does not take tight­en­ing mea­sures, as it would cause a very neg­a­tive im­pact on the econ­omy and the fi­nan­cial sys­tem,” she added.

“The big­gest re­straint this year that pre­vents mon­e­tary eas­ing is the real es­tate mar­ket.”

In re­cent weeks law­mak­ers have un­veiled tighter home-buy­ing reg­u­la­tions in ma­jor cities to cool down gal­lop­ing prop­erty prices.

Re­cent in­di­ca­tors have painted a mixed pic­ture of China’s eco­nomic health.

An of­fi­cial mea­sure of man­u­fac­tur­ing ac­tiv­ity main­tained its strong­est level in nearly two years in Septem­ber while auto sales grew at their fastest rate in three years in the world’s big­gest car mar­ket.

Data last week showed that the price of goods at the fac­tory gate rose in China for the first time in more than four years in Septem­ber, a pos­i­tive sign for de­mand af­ter years of drop­ping prices bat­tered man­u­fac­tur­ers and put a damper on growth.

“Re­cent eco­nomic data suggest that China’s growth mo­men­tum has sta­bilised,” said Ray­mond Ye­ung, an econ­o­mist with ANZ. He pointed to re­cov­ery in pri­vate in­vest­ment af­ter “a pe­riod of mas­sive de­cline”.

But ex­ports sank 10pc year-onyear in Septem­ber, sug­gest­ing the Asian gi­ant is yet to see the bot­tom of its years-long growth slow­down.

Im­ports re­turned to neg­a­tive ter­ri­tory last month af­ter a brief rise in Au­gust, with iron ore and cop­per vol­umes drop­ping, lead­ing an­a­lysts to warn that the re­cent re­cov­ery in man­u­fac­tur­ing ac­tiv­ity could be short-lived.

Look­ing ahead, GDP growth faces the “down­ward pres­sure of a com­ing hous­ing down­turn, in par­tic­u­lar in the first half of 2017”, said Claire Huang of So­ci­ete Gen­erale. –

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