Economy

Q3 GDP growth slows, but economy remains buoyant

By Hu Yuanyuan (China Daily)
Updated: 2010-10-22 13:49

BEIJING - China's GDP growth slowed to 9.6 percent year-on-year in the third quarter, but economic momentum remains strong, the National Bureau of Statistics (NBS) said on Thursday.

The growth - though slightly higher than most economists had forecast - is still lower than the 11.9 percent expansion in the first quarter and 10.3 percent in the second.

"The economic performance is generally sound. The slowing pace in the third quarter contributed to a volatile domestic and international environment," said the NBS spokesman Sheng Laiyun, .

"The economic turnaround has been further consolidated and is moving in the anticipated direction. The government will keep its macro economic policy consistent and stable," he added.

According to the NBS, China's GDP grew 10.6 percent year-on-year in the first nine months of this year to 26.87 trillion yuan ($4.04 trillion), an increase of 2.5 percentage points from the same period of last year.

"We continue to believe that China's economy is headed for a soft landing. Nevertheless, the strong set of indicators suggests that overheating risks remain present, and further policy tightening - most likely in the form of quantitative measures to restrain credit growth and property prices - may be forthcoming in the near term," said Stephen Schwartz, chief economist of the Spanish bank BBVA (Asia-Pacific).

China's urban fixed-asset investment grew 24.5 percent year-on-year in September, a slight slowdown from 24.8 percent in August.

Real estate development has been the main driver of investment growth over the past year. That, along with spiking property prices, has raised fears of a property market bubble. This has prompted policymakers to implement a series of tightening measures since April, including greater controls over bank lending and an increase in down payment levels.

Chang Jian, an economist at Barclays Capital, said the year-on-year growth rate will moderate to 9 percent in the fourth quarter, in comparison to the higher figures last year.

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"We maintain our 10.1 percent growth forecast for this year and 9 percent for 2011," said Chang.

The World Bank has forecast GDP growth of 9.5 percent for China this year and 8.5 percent for 2011, while the central government uses a broad target of 8 percent for annual GDP growth. China reported estimated economic growth of 9.1 percent last year.

Chang said uncertainties for 2011 - mainly in the property market, such as a possible decline in realty prices would negatively affect private investment - thus posing some downside risk.

"Upside risks include stronger-than-expected investment, given that 2011 is the first year of the 12th Five-Year Plan, and strong consumption growth on favorable policies to improve income distribution and to rebalance growth through promoting consumption," Chang said.

Chinese industrial production advanced by 13.3 percent year-on-year in September, following a 13.9 percent gain in August.

"Measures to reduce lending and cool the economy have weighed on demand for industrial goods in recent months, and the government's energy efficiency targets are expected to continue to weigh on industrial output in the coming months," said Ruth Stroppiana, chief international economist, at Moody's Analytics.