Prop­erty and credit booms help to sta­bilise Chi­nese growth

The Myanmar Times - - International Business -

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.

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