Chinese Growth Slows in Q3

But September retail sales and industrial production data show a pick-up.

China’s economic growth slowed for a seventh quarter while showing signs of a pickup last month, reducing the urgency to add stimulus and offering support for a global expansion buffeted by Europe’s debt turmoil.

Gross domestic product expanded 7.4 percent in the third quarter from a year earlier, the National Bureau of Statistics said in Beijing today. That matches the median estimate in a Bloomberg News survey of 43 economists and compares with a previously reported 7.6 percent expansion in the second quarter. Industrial production, retail sales and fixed-asset investment accelerated in September.

Any rebound in growth may ease pressure on the Communist Party as officials begin a once-a-decade leadership transition next month. The government has paused for three months from easing monetary policy in the world’s second-biggest economy even as data showed trade, manufacturing and inflation cooled during the quarter.

“Economic growth is stabilizing on the back of the more accommodative monetary conditions and the increasing infrastructure investment,” Chang Jian, a Hong Kong-based economist at Barclays Plc, said before the release. That suggests less chance of “further significant policy easing” given concerns that inflation and home prices may rebound, she said.

The probability of an interest-rate cut is low and funding injections by the central bank may further delay the need to cut reserve requirements for lenders, Chang said.

China’s economic growth has started to stabilize, Premier Wen Jiabao said in remarks published yesterday by the official Xinhua News agency. The government is confident of achieving annual targets and the economy will continue to show “positive changes,” Wen said, according to Xinhua.

The Shanghai Composite Index, the country’s benchmark stock gauge, has slumped about 14 percent from this year’s high on March 2 on concern the government isn’t loosening monetary policy or introducing stimulus policies fast enough to reverse the slowdown. The gauge rose 0.6 percent at 10 a.m. local time.

The economy expanded 7.7 percent in the first three quarters from a year earlier, the statistics bureau said. Wen set a full-year growth target of 7.5 percent in March, the lowest goal since 2004.

 

Factory Output

Industrial production increased 9.2 percent in September from a year earlier, rebounding from a three-year low of 8.9 percent expansion in August, today’s statistics bureau report showed. Economists surveyed by Bloomberg News forecast a 9 percent gain, based on the median estimate.

Retail sales advanced 14.2 percent in September from a year earlier, today’s statistics bureau report showed, compared with the 13.2 percent median estimate. Fixed-asset investment excluding rural households rose 20.5 percent in the first three quarters, higher than the 20.2 percent median forecast in a survey.

Rio Tinto Group, the world’s third-biggest mining company, said last month it expects economic growth in China to accelerate toward the end of the year as the biggest global metals consumer eases credit restrictions and boosts spending. China generated 31 percent of Rio’s sales last year.

The third quarter may mark a “cyclical bottom” of the downturn in growth, Sun Junwei and Qu Hongbin, China economists at HSBC Holdings Plc, said in a note dated Oct. 13.

“The filtering-through of monetary easing combined with the scope of faster fiscal spending and acceleration of infrastructure construction should support a growth recovery in the coming months,” the analysts wrote.

Today’s data followed reports showing exports exceeded forecasts in September and money supply grew at the fastest pace in 15 months. Inflation last month was close to the slowest pace in two years and producer prices fell the most since 2009, government data showed on Oct. 15, giving authorities more room to ease policy.

China’s economy is expanding at a slower yet still “robust pace” and may grow 7.8 percent this year, central bank Deputy Governor Yi Gang said last week. The nation will keep taking steps to stabilize growth and has “relatively large room” to use monetary and fiscal policies compared with other countries, Yi said.

The People’s Bank of China has refrained from monetary easing since July after cutting interest rates twice in one month. The central bank lowered the reserve-requirement ratio for lenders three times from November to May to boost lending and support growth. At the same time, authorities have accelerated approvals for investment projects and rolled out tax support for exporters.

The Ministry of Railways increased its 2012 infrastructure spending plan to 516 billion yuan ($83 billion) from 496 billion yuan, according to a bond prospectus issued Oct. 10.

 

Bloomberg News

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