Growth falls to 5-year low in Q3

By Song Shengxia Source:Global Times Published: 2014-10-22 0:38:01

No need for policymakers to act aggressively to shore up economy: analyst


 

China's economy grew at its weakest pace in more than five years in the third quarter, at 7.3 percent, although the data was still better than many expected.

Despite the still sluggish property market, there was improvement in the export and service sectors, indicating the government will not rush into drastic actions to pump up the economy.

The country's GDP grew 7.3 percent in the third quarter from a year earlier, slowing from 7.5 percent in the second quarter and 7.4 percent in the first, the National Bureau of Statistics (NBS) said Tuesday.

It was the slowest pace since the first quarter of 2009 during the global financial crisis, when growth hit 6.6 percent. But the figure was higher than the forecast figure of 7.2 percent.  

"Although GDP growth slowed in the third quarter, employment and prices remain stable, indicating the economy continues to operate within a reasonable range," NBS spokesperson Sheng Laiyun said on the release of the data.

China created 10 million new urban jobs in the first nine months, hitting the annual target ahead of schedule. Consumer inflation slowed to a near five-year low of 1.6 percent from September 2013, data showed.

Speaking to delegates to the upcoming APEC Finance Ministers Meeting in Beijing Tuesday, Premier Li Keqiang said there have been positive and profound changes in the economy.   

It takes time for reforms to take effect and he remains confident in China's economy, the premier said.

"The steady economic growth pattern hasn't changed. Growth of between 7 and 7.5 percent is acceptable. It's unnecessary to get bothered over a 0.1 or 0.2 percentage point drop in growth," said Cai Jin, vice president of the China Federation of Logistics and Purchasing, which helps compile the official purchasing managers' index (PMI).

"Based on data we are tracking, more positive factors will emerge in the fourth quarter, with the PMI and exports expected to improve in the coming months," Cai noted. 

Tuesday's data also showed that industrial output grew 8 percent in September from a year ago, rebounding from the 6.9 percent six-year low in August. 

The ratio of the service sector to GDP accounted for 46.7 percent in the first three quarters, up 1.2 percentage points from a year earlier and 2.5 percentage points higher than that of the industrial sector, the NBS data showed.

The contribution of consumption to GDP growth stood at 48.5 percent in the first nine months, compared with 41.3 percent for that of investment and 10.2 percent for exports.

Despite these bright spots, some indicators, especially weak property investment, continued to stoke concerns. 

Fixed assets investment rose 16.1 percent year-on-year in the first nine months, declining from 16.5 percent in the first eight months, the NBS data showed.

Real estate investment, which accounted for around 20 percent of the total fixed assets investment and affects many other sectors, including steel and cement, grew 12.5 percent in the January-September period, slowing from 13.2 percent in the first eight months. 

The People's Bank of China announced in late September that banks could offer a maximum 30 percent discount on loans to first-time homebuyers and to those who own a home and have paid off an existing mortgage.

"The government has done a lot to stabilize the economy, including targeted monetary easing and easing property restrictions. Broad-based stimulus measures are unlikely given the still reasonable growth rate," said Zhang Yongjun, a research fellow at the China Center for International Economic Exchanges.

"Even if the economy continues to slide, the government still has a lot of monetary tools to deploy to arrest further slowdown and the low inflation gives it more leeway to exercise them," Zhang said.

Chinese leaders have made it clear that China needs to adapt to the "new normal" in its growth and will rely more on reforms to unleash growth potentials.

"The target was always intended to be flexible and we don't think policymakers will panic as a result of the slowdown given that it remains highly concentrated in a few sectors suffering from overcapacity and that the broader economy and labor market remain healthy," Julian Evans-Pritchard, an analyst at Capital Economics, a London-based economic consultancy, said in a research note e-mailed to the Global Times Tuesday. 

"With policymakers now prioritizing employment and economic rebalancing over growth, we don't think they will feel the need to act aggressively to shore up the economy in response to today's data," the note said. 



Posted in: Economy

blog comments powered by Disqus