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China's third-quarter growth touches 5-year low
CHINA'S third-quarter economic growth ground to its slowest pace in five years as the country continues to struggle with a downturn in the property sector, overcapacity and weak export demand. Analysts, however, remained cautiously upbeat as they had expected worse.
The world's second largest economy grew 7.3 per cent in the third quarter, the National Bureau of Statistics said on Tuesday - down from 7.5 per cent in the previous three months and its slowest pace since the global economic crisis in 2009.
Many factors were behind the slower expansion. Domestically, a continued slump in the property sector - which accounts for about half of GDP - as well as overcapacity were hard trends to reverse. Also weighing on growth were Beijing's crackdown on corruption and sluggish demand in Europe, China's main trading partner.
Tuesday's official figures showed housing sales falling 10.8 per cent in the first nine months of the year, with a strong ripple effect on the steel, cement and coal sectors.
Nonetheless, the growth figures were a tad above economists' estimates, prompting markets to react positively to the news.
The Hong Kong stock market closed marginally higher with the Hang Seng Index edging up 18.32 points to 23,088.58 on a turnover of US$6.78 billion.
In mainland China, the benchmark Shanghai Composite Index fell 0.72 per cent, or 17.07 points, to 2,339.66 on a turnover of US$24 billion.
The Shenzhen Composite Index, which tracks stocks on China's second exchange, eased 0.76 per cent, or 10.21 points.
Other indicators were also above expectations with industrial production growing 8.5 per cent in the first three quarters of the year, up 0.3 percentage point from the first two quarters. In September alone, the indicator was up 8 per cent against a more than five-year low of 6.9 per cent in August.
Fixed asset investment grew 16.1 per cent over the same period, down from a 16.5 per cent pace from January to August.
Retail sales, a key indicator of consumer spending, expanded 12 per cent in the nine-month period.
"The data came in broadly in line with our expectations. The stabilisation in GDP growth suggests that domestic demand has found some support in the third quarter," said Qu Hongbin, China economist with HSBC.
Julian Evans-Pritchard, China economist with Capital Economics, added: "The upshot is that although growth has slowed, it reflects a welcome rebalancing away from excess investment in certain sectors of the economy and is not cause for significant concern."
Over the past month, government and central bank officials have tempered views on China's slowdown and insisted the economy remains healthy.
A string of support measures were introduced in April in the railway and housing sectors. The government also relaxed some control policies in the housing market including easing downpayment requirements and lowering interest rates for first- and second-home buyers.
The latest moves by the central bank have included an injection of 500 billion yuan (S$103.5 billion) into the country's major banks - which, according to the central bank, will be followed by another 200 billion yuan. But it has avoided across-the-board cuts to interest rates or banks' reserve requirements.
While China will now most likely miss its 7.5 per cent growth target for the year, economists do not expect more aggressive measures beyond the central bank's continued slight policy easing.
The government has made it clear its priorities are now on steering China on a more sustainable economic path, with a focus on greener growth and domestic consumption. Employment, a closely watched indication, has remained strong despite the slower growth rates.
"With policymakers now prioritising 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 the data," said Mr Evans-Pritchard of Capital Economics.
Notwithstanding that, economists say the worst may not be over.
Overcapacity and local government debt still overhang on potential growth as capital is underutilised and banks roll over bad loans from the 2009 stimulus.
"Industry overall is beset with a lack of demand and awash in overcapacity," Alaistair Chan, economist with Moody's Analytics, said on Tuesday.
"The process of reducing this overcapacity through forced closures and mergers is taking much longer than the central government anticipated, and delaying the economy's transition away from heavy industry," Mr Chan said.
Economists agree the target for 2015 will be cut to 7 per cent as China continues to focus on reform.