Property and credit booms help to stabilise Chinese growth
CHINESE growth stabilised in the third quarter, data showed yesterday, as ample credit and hot property markets propped up the world’s second-largest economy.
But while the forecast-beating reading was in line with state targets, it came as experts warned that authorities have relied too much on easy credit, which has in turn increased financial risks.
The economy grew 6.7 percent in July to September, just above the 6.6pc predicted in an AFP poll.
“The general performance was better than expected,” National Bureau of Statistics (NBS) spokesperson Sheng Laiyun told reporters. “The national economy grew steadily.”
The government has targeted 6.57pc growth for the year, following 6.9pc last year – the slowest rate in a quarter of a century.
“It was so in-line with expectations that I could have written this yesterday, to be honest,” Michael Every with Rabobank in Hong Kong told AFP. “It’s amazing what a housing bubble and crazy debt increases can achieve.”
Data also showed a pickup in retail spending, which has become an increasingly important component as Beijing looks to recalibrate the country’s growth driver from investment and exports to consumer demand.
But Beijing’s attempts to retool the economy have proved painful, with authorities resorting to stimulus measures as they try to avoid a hard landing.
Mr Sheng acknowledged that the economy was in “a critical period of transformation and upgrading, with old drivers of growth to be replaced by new ones”.
With “a number of unstable and uncertain domestic and external factors”, he added, “the foundation of continued economic growth is not solid enough”.
Some analysts have questioned the accuracy of Chinese data, arguing they are subject to political manipulation and justification.
“As always, the GDP figures will be met with some scepticism,” said Julian Evans-Pritchard of Capital Economics, who thinks expansion is slower than official reports.
Though the figures suggest economic activity is broadly holding up, he said, the recent recovery was “on borrowed time” as Beijing tried to rein in runaway lending and hot housing prices.
The booming property market and loose lending supported the latest GDP figures, Claire Huang of Societe Generale told AFP, adding that new house-buying regulations and necessary credit tightening meant “the downturn will become even more obvious” in the fourth quarter and early next year.
New loans by Chinese banks in September surged nearly 30pc over the previous month, deepening concern about risky credit expansion.
Earlier this month the International Monetary Fund warned that China’s dependence on debt was growing at a “dangerous pace” and risked a “disruptive adjustment” in the financial system.
That came after the Bank for International Settlements – dubbed the central bank of central banks – warned China’s banking sector could be facing an imminent debt crisis, fuelling fresh fears of a blowout that could hit the global financial system.
China’s industrial output growth eased to 6.1pc in September, down from 6.3pc in August as sluggish global demand weighed on the world’s biggest trader in goods.
A slowdown in the supply chain of electronic goods dragged on production, ANZ analysts said, noting a particular slide in making and sale of mobile phones.
But retail sales, a key measure of consumer spending, rose 10.7pc onyear last month, representing a slight acceleration from August.
Fixed-asset investment, a gauge of infrastructure spending, rose 8.2pc in the first nine months of the year.
The figures showed that crude steel production rose 3.9pc on-year in September, despite repeated pledges to cut overcapacity and excess production in the industry, which is dominated by bloated state-owned enterprises.
Looking ahead, Beijing will shift its focus from GDP to tackling excess capacity and massive corporate debt, ANZ analysts said in a note.
Investors took the figures in their stride with the benchmark Shanghai Composite Index fractionally higher by the noon break yesterday.