China’s growth rate slows to 7.4%
Chinese economy has slowed for a seventh quarter as problems in Europe and the US hurt demand for its goods.
The annual rate of growth was 7.4% in the third quarter, down from 7.6% in the previous three months.
However, there were signs that the world’s second-biggest economy was now stabilizing and rebounding.
That would be good news for China, which is facing a leadership change, and the rest of the world, which has benefited from its recent boom.
“Clearly, concerns over continued slowdown can now be put to rest,” said Dariusz Kowalczyk, senior economist as Credit Agricole-CIB.
“The last month of the quarter brought acceleration of industrial output, retail sales and fixed asset investment in year-on-year terms, highlighting the fact that improvement of momentum of the economy was particularly strong in September.”
In Hong Kong, the main Hang Seng stock index rose 0.7% on the news, while in Shanghai, shares climbed by 1.2%.
China’s growth over the past few years has been led by the success of its export and manufacturing sector, as well as by a credit-fuelled investment boom directed by the government.
But a number of issues have recently hurt demand for China’s exports, not least the debt crisis in the eurozone and a sluggish rebound in the US.
This had increased worries that China’s economic growth would slow further in coming months, and may even dip below the 7% mark, leading to a longer economic slump both inside and outside of the country.
That is something that China was keen to avoid as it prepares for a once-in-a-decade leadership change. China’s ruling communist party is about to unveil its next generation of leaders in November.
The fears had been that a sharp slowdown in the economy may result in business cutting jobs, leading to higher unemployment.
There had also been concerns that a significant slowdown may prompt a big drop in property prices – eroding the value of assets of many people.
However, on Thursday, China also released other key economic indicators alongside its gross domestic product (GDP) data, and these indicated that things may be starting to pick up again.
China’s industrial production rose by a more-than-expected 9.2% in September from a year earlier. That was up from 8.9% growth in August.
Retail sales, meanwhile, during the same month were 14.2% higher than a year earlier, signalling that domestic consumption was growing.
“The September data indicates economic momentum has picked up strongly compared with July and August,” said Zhang Zhiwei, chief China economist at Nomura in Hong Kong.
The latest numbers added to the optimism that followed trade figures which were released over the weekend. They showed a 9.9% year-on-year growth in exports during September, a big jump from the 2.7% growth recorded in the previous month.
Zhang Zhiwei added the latest data “helps reinforce our view that growth will rebound visibly in the fourth quarter”.
China has announced various stimulus measures in recent months aimed at boosting domestic consumption and sustaining growth.
The central bank has lowered the amount of money that banks need to keep in reserve three times in the past few months in order to increase bank lending.
It has cut interest rates twice since June to reduce the burden on businesses and other borrowers.
Beijing has also approved infrastructure projects worth more than $150 billion, aimed at spurring a fresh wave of economic development.
There had been hopes that China’s policymakers may take further measures to spur growth. But with September’s positive set of economic data analysts say they may now see Beijing delay a major move.
“There is no room, or need, for any further major stimulus, especially a rate cut,” said Dariusz Kowalczyk of Credit Agricole-CIB.
Even so, other analysts reckon that any rebound is in its early stages and if anything, it needs a further boost to take hold and continue.
The worry is that should China stop helping consumers and businesses, then growth could stagnate or start to retreat again.
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