Flaws with how the GDP deflator is calculated, along with political pressure to meet growth targets that have become increasingly at risk, have meant that official growth rates have not slowed almost as quickly as most third party measures of growth in recent years.
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The property market, which has been subdued for a number of years, also showed signs of growth in September with the rate of housing starts growing for the first time since October last year.
Weakening trade and manufacturing have fueled concern about possible job losses and unrest.
To stoke activity, the central bank has already cut interest rates five times since November and reduced banks’ reserve requirement ratios, though analysts believe an increase in fiscal spending could be more effective in lifting growth. Manufacturers are shrinking and shedding millions of jobs while consumer-oriented businesses expand.
Economic output rose by 6.9pc in the third quarter, according to the country’s National Bureau for Statistics, higher than the 6.8pc forecast by economists, but the lowest pace of expansion since early 2009.
Retail sales, a key indicator of consumer spending, increased 10.9 per cent in September, marginally ahead of expansion the previous month. “But robust consumption and infrastructure prevented a sharper slowdown”.
A major challenge is demand, both at home and for exports. But analysts who have developed rough substitutes for the economy as a whole put growth closer to 5-6%. It would be more than double the 3.1 percent growth forecast by the International Monetary Fund for the United States.
– Chinese leaders have been trying to reassure global markets that Beijing is able to manage the world’s second-largest economy after the shock devaluation in the yuan and summer stock market crash sparked fears of an economic hard landing.
“We think there is further slowing to go”, said Wei Li of Commonwealth Bank of Australia in a report.
There are also enough jobs to go around at the moment, with the services sector providing enough new jobs to offset all the lost jobs in the manufacturing sector.
Economists agree that a long-term slowdown in Chinese growth is inevitable due to structural factors such as a shrinking labour force and the end of “catch-up growth” as China completes the transition from a rural to industrial economy. So despite all the noise – worries about a shadow banking crisis, a glut of apartments that can’t be sold and a near 30 per cent fall in the Shanghai Composite during the third quarter that combined to spook global investors – the economy didn’t fall in a heap.
“It suggests again the world is awash with oil”, Barratt said.
Well it’s doubtful that if China’s economy was measured in the way we measure ours that it would be showing the 6.9% annual growth announced today.
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Although growth may be holding up in national headline figures, North and Northeast China are basically having a regional recession with their heavy exposure to commodities and over-capacity secondary industries. However, it remains to be seen whether the country can achieve its 7 percent (y/y) growth target in (full-year) 2015.
