Chinese growth expected to be lower but not critical
Pressure piles on for more stimulus
CHINA’S economic growth is expected to fall below 7 percent for the first time since the global financial crisis in the third quarter, putting pressure on policymakers to roll out more support measures as fears of a sharper slowdown spook investors.
Chinese leaders have been trying to reassure global markets that Beijing is able to manage the world’s second-largest economy, after a shock devaluation of the yuan and a summer stock market plunge fanned fears of a hard landing.
But even the government concedes the economy is entering a slower phase after decades of breakneck expansion.
Growth in third-quarter gross domestic product (GDP) probably slowed to 6.8 percent from the same period last year, down from 7 percent in the second quarter, according to a poll of 50 economists.
Weakest pace
That would be the weakest pace of expansion since the first quarter of 2009, when it tumbled to 6.2 percent, but it is far from an alarming loss of momentum.
The highest forecast in the poll was 7.2 percent and the lowest was 6.4 percent, though some investors fear current growth levels could already be much weaker than the official data will suggest.
“We expect the government to maintain loose monetary policy and step up fiscal spending in response to the economic slowdown,” said economists at China International Capital, a domestic investment bank.
“We believe that loosening measures may help cushion the slowing momentum in economic CONSUMER inflation in China cooled more than expected in September while producer prices extended their slide to a 43rd consecutive month, adding to concerns about deflationary pressures in the world’s secondlargest economy.
The consumer price index (CPI) rose 1.6 percent in September from a year earlier, the National Bureau of Statistics (NBS) said yesterday, lower than expectations of 1.8 percent and down from August’s 2 percent.
In a sign of sluggish demand, the non-food CPI was even milder, with an annual growth growth but it’s difficult to reverse the long-term downward trend.”
Instead of calming financial markets, a surprisingly resilient reading on Monday may reinforce scepticism about the reliability of Chinese official rate of 1 percent in September, the NBS data showed.
The easing CPI was mainly due to a high comparison base last year, said Yu Qiumei, a senior NBS statistician.
CPI rose 0.5 percent month on month in September 2014, compared with a 0.1 percent growth last month.
Reflecting growing strains on Chinese companies from persistently weak demand and over-capacity, manufacturers continued to cut selling prices to win business.
The producer price index (PPI) fell 5.9 percent from a year ago, in line with the data. Some economists, however, think government statistics may actually be underestimating consumption and good service sector growth.
Despite weak exports and imports, industrial over-capacity and a property downturn, expectations and the same rate of decline as in August, which was the biggest drop since the depths of the global financial crisis in 2009.
“Overall, the still weak PPI highlights the severe overcapacity problem and sluggish domestic investment demand,” said economists at Nomura.
“Given the lacklustre growth outlook, we continue to expect moderate fiscal stimulus from the central government and continued monetary easing,” they said.
Nomura expects one more cut to banks’ reserve requirement ratio this year. – Reuters annual economic growth in the first two quarters was 7 percent. This was in line with Beijing’s full-year target, with the government rejecting suggestions that the figures were being inflated to meet official forecasts. – Reuters