China’s economic growth stays stable as ruling party meets

FAN Editor

China’s economic growth stayed relatively stable in the latest quarter, buoyed by strength in retail spending and exports, giving the ruling Communist Party a boost as President Xi Jinping prepares for a new term as leader.

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The economy expanded at a still-robust 6.8 percent annual pace in the three months ending in September, a marginal change from the previous quarter’s 6.9 percent, government data showed Thursday.

Forecasters expect the unexpectedly strong growth this year to weaken as Beijing tightens controls on bank lending to cool a rise in debt cited by analysts as the biggest threat to economic stability.

Beijing also faces wider challenges, including surplus industrial capacity that is depressing prices of steel and other goods. That has aggravated trade tensions with Washington and Europe, which complain low-cost Chinese exports threaten jobs.

“The risk of a China economic slowdown or downside risk scenario of a hard landing remains a significant risk to the medium-term global outlook,” said IHS Markit economist Rajiv Biswas in a report. “The rest of the Asia-Pacific is particularly vulnerable.”

Communist leaders are trying to steer China to slower, more sustainable growth based on consumer spending instead of exports and investment. By using repeated infusions of credit to prevent activity from slowing too abruptly, however, Beijing has pushed up debt and delayed the economic rebalancing.

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In a speech Wednesday at a ruling party congress, Xi said China’s “prospects are bright but the challenges are grim.” He said the party would have to take big risks and overcome “major resistance.”

Still, companies and investors are looking for signs of the direction and speed of economic reform.

“We will be watching for indications of lowering growth expectations and reining in credit growth,” said Standard & Poor’s economist Paul Gruenwald in a report.

Xi’s speech Wednesday repeated promises to give market forces the “decisive role” but also affirmed the party’s intention to build up state industry, a strategy reform advocates say that might waste money and drag on economic growth.

The speech “does not imply a significant change in the stance on key policy areas,” said Louis Kuijs of Oxford Economics in a report.

Thursday’s data showed retail sales rose 10.3 percent in September over a year earlier, down slightly from the 10.4 percent rate of the first three quarters.

That was helped by a 34.2 percent rise in e-commerce spending over a year earlier, an 8.1 percent improvement over the same period of 2016.

The party’s decision to go ahead with announcing the data during its politically sensitive congress had prompted expectations they would be positive.

Trade data reported earlier showed export growth accelerated in September to 8.1 percent from August’s 5.5 percent, at least temporarily averting concern about politically dangerous job losses in export industries that employ millions of workers.

Investment in factories, office buildings and other fixed assets rose 7.5 percent in the first three quarters, down from the first half’s 8.6 percent rate. Factory output rose 6.7 percent in the first three quarters, up from 6 percent at the same time last year.

The International Monetary Fund has forecast China’s full-year growth will hold steady at last year’s level of 6.7 percent. The IMF raised its outlook twice this year, citing strong government spending.

The government’s growth target is 6.5 percent “or higher if possible.”

“We project a further cooling of growth through 2018,” said Kuijs.

Regulators have cited reducing risk in China’s financial system as a priority this year. Banks have been told to look closely at borrowers, especially those trying to make acquisitions abroad, to ensure they can manage their debts.

The ruling party’s plans call for doubling incomes from 2010 levels and achieving a “relatively prosperous society” by 2020. In a report, UBS economists said that should require growth of just 6.3 percent for the rest of the decade.

Xi’s speech Wednesday included no growth target but he said “development is the foundation and the key to addressing all problems.”


National Bureau of Statistics (in Chinese):

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