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China's economy slows further

Oct 18 2012 07:59 AFP

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Beijing - China said Thursday its economy grew 7.4% in the third quarter, easing for a seventh straight quarter, but the government and analysts said the data indicated it was stabilising.

The performance is the weakest since early 2009 during the global downturn as persistent problems in key Chinese export markets in Europe and the United States continued to weigh. The economy grew 7.6% in the previous quarter.

However, positive indicators for September were seized upon as signs that the economy was bottoming out and growth could pick up again in the next three months, while the need for major stimulus was receding.

"Judging from figures in the third quarter and particularly in September, the signs that the national economy is stabilising are clearer," National Bureau of Statistics (NBS) spokesperson Sheng Laiyun told reporters at briefing unveiling the data.

"The main indicators showed that although growth still slowed, the pace of the decline slowed and some indicators even increased at a faster speed."

The figures come a day after state media reported that Premier Wen Jiabao had said the economy began stabilising over the past three months and should meet Beijing's 2012 goal of 7.5% growth.

The latest result dragged growth down to 7.7% for the first nine months of the year, but Sheng on Thursday reiterated Wen's comments, saying China was "fully confident" of hitting its target, although he said the economy still faced "uncertainties".

He also said "mild rebound" was possible in the fourth quarter, which some analysts echoed.

"Basically it's obvious that the economy is bottoming out, and economic growth will likely be higher in the fourth quarter than the third quarter," said Lu Ting, Hong Kong-based China economist for Bank of America Merrill Lynch.

Underlining confidence in the economy was September data also released Thursday by the statistics bureau showing industrial production rose 9.2% year-on-year in September, from 8.9% in August.

Retail sales, the main gauge of consumer spending, rose 14.2%, up from August's 13.2%, and fixed-asset investments, a key measure of government spending on infrastructure, rose 20.5% in January-September, compared with 20.2% in the first eight months.

On Saturday, the government said exports rose a solid 9.9% in September year-on-year to a record monthly high while imports increased after having contracted the month before.

China's economy, which grew an annual average of more than 10% in the decade through 2010 and is a major driver of world growth, has slowed since early last year owing to broader global woes.

Government efforts to curb an overheated real-estate market have helped stabilise property prices but have been blamed for dampening demand in related sectors such as construction.

Authorities have tried to bolster growth this year by cutting interest rates twice and loosening other monetary policies, but with little success.

But economists said the latest numbers should temper calls for any sort of economic stimulus package.

Analysts have previously said such a package looked unlikely due to problems blamed on a previous stimulus programme in the wake of the 2008 financial crisis, particularly inflation.

Political analysts also believe bold policy steps were unlikely ahead of a sensitive Communist Party congress that opens on November 8 and will select a new slate of leaders for the next decade.

Authorities will, however, need to maintain loose monetary policies and could further cut interest rates and bank reserve requirements, a move aimed at boosting lending, said Li Huiyong, an economist at Shenyin Wanguo Securities in Shanghai.

"After all, we still face lots of uncertainties and need to rely on loose monetary policies and fiscal policies to safeguard the economy," he said.

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