Growth rate in China dips to 7.4% despite positive data

Fri, Oct 19, 2012, 01:00

CHINA’S ECONOMIC expansion slowed for the seventh successive quarter, but the worst slump since the global financial crisis began may be bottoming out.

Upbeat retail sales and fixed-asset investment pointed to a rebound in the world’s second-largest economy, which expanded 7.4 per cent from the year before in the three months ending in September. That was slower than the second quarter’s 7.6 per cent growth and was the lowest expansion in 14 quarters. But the decline was much less steep than in earlier quarters. Quarter-on-quarter growth at 2.2 per cent was the biggest such gain in a year.

Premier Wen Jiabao said economic growth has started to stabilise and the government was confident of meeting annual targets and showing “positive changes”.

In the face of a downbeat external market and global economic woes, China lowered its full-year growth target for 2012 to 7.5 per cent in March, after growth of 9.2 per cent in 2011.

“We feel that GDP growth has bottomed, but that there is limited upside on the horizon,” said Alistair Thornton of IHS Global Insight. “Those fearing a hard landing will be able to sleep a little better tonight, but . . . the picture is one of emerging stabilisation.”

Retail sales rose 14.4 per cent, up from 14.1 per cent in the first half. And there has also been an improvement in investment in factories and fixed assets. Industrial production rose 9.2 per cent in September year on year, bouncing back from a three-year low of 8.9 per cent expansion in August.

Some analysts believe the recovery lacks impetus. “We think the speed of the turnaround implied by the official figures is implausible and, barring significant further policy moves, expect only a tepid turnaround over coming quarters,” wrote Capital Economics analysts Mark Williams and Wang Qinwei.

Analyst Wang Tao at UBS said nominal GDP growth had slowed further. “This should change when demand continues to recover and destocking ends in the next quarter or two. We think that continued rebound in infrastructure investment and a modest and stable recovery in the property sector will remain key,” she said.