Stabilization Trend

Economists Jia Hai, Director of the Department of Fixed Assets Investment Statistics, National Bureau of Statistics,

Director of the Department of Trade and External Economic Relations Statistics, National Bureau of Statistics of China and

Chief China economist, UBS Investment Bank, believe the latest economic data shows steady growth and a good chance China will meet its annual growth target, although some long-term concerns remain. Their ideas follow:

Investment in fixed assets stable Jia Hai In the first three quarters, investment in fixed assets (excluding rural households) was 42.69 trillion yuan ($6.57 trillion), a yearon-year growth of 8.2 percent. With a series of policy measures, investment growth appeared to be stable and in recovery.

Private investment has undergone positive changes due to the market environment improving and the government increasing its efforts of reform and its support for private investment.

During January-september of this year, manufacturing sector investment was 13.52 trillion yuan ($2 trillion), up 3.1 percent. With the rebound in the price of crude oil, cement, steel and nonferrous metal, investment in high energy-consuming manufacturing in this period remained decreasing.

The dual pressures of overcapacity and a sluggish market demand have constrained economic development. In addition, the regulation and control policies in the hot urban real estate market, and the destocking pressure in the third- and fourth-tier cities create uncertainties for future real estate investment. That should be cause for concern. In the first three quarters, along with the steady growth of residents’ income, and the implementation of the policy which maintains economic stability and promotes consumption, the consumer goods market continued to maintain steady growth. A new trend shows that consumption structure has been upgraded, while the online retail sales enjoyed rapid growth.

The consumer goods market grew moderately in the first nine months, with total retail sales of consumer goods reaching 23 trillion yuan ($3.4 trillion), a year-on-year increase of 10.4 percent, or 0.1 percentage point higher than that in the first half of the year.

Residents’ consumption enjoyed steady growth, increasing the contribution of consumption, which continued to drive China’s economic growth. Statistics show that between January and September, the final consumption expenditure contributed 71 percent to the economic growth.

This year, along with the development of mobile payment, online car renting and distance education, online consumption maintained rapid growth. It is estimated that, in the first three quarters, the sales of the traditional retail industry increased by 7 percent year on year.

China’s growth steady Wang Tao China’s economy has shown slightly strongerthan-expected growth in the third quarter, with a GDP growth of 6.7 percent year on year. This positive trend can be explained by strong real estate activities since the beginning of the year, which have helped maintain property and industrial investment and uphold consumption. The rise in property investment had a positive impact on private fixed asset investment over the past two months, which indicates that the effects of recent higher corporate revenue and profits are starting to be felt throughout the economy.

GDP growth is expected to slow marginally in the fourth quarter to 6.5-6.6 percent year on year, with property sales slowing down in the year’s last quarter and then more sharply in 2017. We do not expect any notable credit acceleration or interest rate cut by the end of 2016, given the concerns over a real estate bubble and rising leverage.