China economy shows solid momentum
BEIJING: China’s economic growth looked set to accelerate for the first time in seven years this year, after hardly skipping a beat in the third quarter, but efforts to cut risks in property and debt are beginning to weigh on parts of the world’s second-largest economy.
Beijing’s push to consolidate and restructure its industrial sector have paid dividends as factory output beat expectations, while strong fiscal spending and sustained public investment helped boost domestic demand.
But concerns remain that much of the growth is debt-driven, with central bank governor Zhou Xiaochuan on Thursday warning about household and corporate leverage.
A crackdown on rising financial risks and measures to cool he property market, which some expect to accelerate after the congress, has already started to bite. Growth in new construction slowed and property sales dropped for the first time in more than two-and-half years in September.
In all, the economy was solid and expected to comfortably beat the government’s target of around 6.5 per cent for this year and 2016’s growth rate of 6.7 per cent, which was a 26year low.
The economy grew 6.8 per cent in the third quarter from a year earlier, in line with the estimate in a Reuters poll and down from 6.9 per cent in the second quarter, the National Bureau of Statistics said on Thursday.
While the numbers met economist expectations, they raise questions about the more optimistic forecast flagged by the country’s central bank chief this week. Zhou on Sunday said gross domestic product (GDP) could grow 7 per cent in the second half.
Analysts had pencilled in a gradual GDP slowdown due to an expected softening in property investment and construction as more cities try to cool surging housing prices, while a government campaign against riskier lending pushes up borrowing costs.
“Unequivocally, the property boom has peaked,” said Rosealea Yao, a property analyst at Gavekal Dragonomics. “Given how fast the sale numbers are declining, we expect no big rebound this time.”
China’s economy has surprised global financial markets and investors with robust growth so far this year, driven by a renaissance in long-ailing “smokestack” industries such as steel and strong demand from Europe and the United States.