China's economic growth picked up last quarter as expected as a combination of breakneck investment and buoyant bank lending more than made up for a slump in exports.
But the 8.9 per cent growth rate fell short of some of the more optimistic predictions in the market, and the government promptly said it would stick to the ultra-loose policies it has been following for the past year.
Last quarter's year-on-year growth exactly matched the forecast of a Reuters poll and was up from 7.9 per cent in the April-June period and just 6.1 per cent in the first three months of 2009 in the depths of the global downturn.
Goldman Sachs said quarter-on-quarter growth had in fact slowed to around 10.2 per cent from the second quarter's annualised pace of 16.5 per cent.
But with GDP expanding 7.7 per cent in the first nine months, the government said it would now easily reach its target of 8 percent average growth for the year as a whole, widely regarded as the minimum needed to keep a lid on unemployment.
"We can say with certainty that achieving 8 percent GDP growth this year is completely assured. Without doubt," said Li Xiaochao, the spokesman of the National Bureau of Statistics, which released the figures.
Li, though, quickly reaffirmed the policy status quo.
"We have stressed a proactive fiscal policy and appropriately relaxed monetary stance to keep consistency and stability in economic policy -- according to my understanding, that means no change in policy," he said, restating the thrust of a cabinet statement issued yesterday.
A breakdown of growth so far this year showed just how effective Beijing's 4 trillion yuan ($585 billion) pump-priming package has been in galvanising investment and putting the once-fanciful 8 per cent growth goal target easily in reach.
Capital spending contributed 7.3 percentage points to headline growth of 7.7 per cent in the first three quarters, while consumption accounted for 4 percentage points. Net exports, meanwhile, subtracted 3.6 percentage points.
With the United States and Europe emerging from recession with huge debt burdens that will weigh on consumption, global policymakers are looking to China to pull more weight by expanding domestic demand.
Today's data showed China doing just that.
Fixed-asset investment in urban areas, which has been the main driver of China's double-digit growth of recent years, rose by a third in the first nine months.
Whereas investment in the first half of the year was overwhelmingly government-led, capital spending by mostly private real estate developers is now surging in response to the ready availability of credit and growing confidence in the economy.
That confidence is being buoyed by rising incomes. Urban Chinese had 10.5 per cent more disposable income in the first nine months, after adjusting for inflation, than a year earlier.
Retail sales rose 15.5 per cent in the 12 months to September, accelerating from August's reading of 15.4 per cent and exactly in line with market forecasts.
Industrial production growth quickened to 13.9 per cent in the 12 months to September from 12.3 per cent in August, beating the median market forecast of 13.3 per cent. Daily steel output in September matched August's record, while iron ore production scaled a new high.
Most economists expect even stronger growth in 2010 given this year's relatively low base of comparison, the likelihood of a partial recovery in net exports and the fiscal stimulus already in the pipeline.
Although the economy has perked up, China is still mired -- technically -- in deflation. The consumer price index fell 0.8 per cent in September from a year earlier, while producer prices were down 7 per cent. Both figures were exactly as expected.
Both gauges have shown prices rising steadily month on month since July, but Li, the NBS spokesman, said inflation was not a problem for now.
Reuters