data buoy China at ‘pivotal moment’ in economic rebalancing China’s
stronger than expected growth figure announced yesterday will save
Xi Jinping’s blushes as he tours the UK this week. It also suggests the
country’s economic rebalancing is largely on track — a view that has
been challenged by some analysts over recent months.
Gross domestic product grew 6.9 per cent in the third quarter, down from
7 per cent in the first and second but still within range of the
official full-year target of “around 7 per cent”.
More importantly, the composition of growth continued to shift in the
desired direction of policymakers: towards consumption and services and
away from manufacturing and investment.
“Chinese rebalancing is at a pivotal moment. Should it fail the global
economy?.?.?.?could be pushed into a major downturn,” Angus Nicholson,
analyst at IG, write in a note to clients.
Consumption accounted for 58 per cent of that growth, or 4 percentage
points. Investment, which includes construction of new houses and
factories, contributed only 43 per cent, or 3 percentage points.
Services, whose share of overall output passed 50 per cent this year,
grew 8.6 per cent, well ahead of the 5.8 per cent expansion in the
struggling industrial sector.
Analysts say rising incomes amid a still-tight labour market are
“The consumption share of GDP is bigger and bigger because ordinary
people’s share of national income is higher and higher,” Huang Yiping,
professor at Peking University’s China Center for Economic Research,
told local media yesterday. Mr Huang sees telecommunications, education,
travel, elderly care and financial services as sectors likely to benefit
most from increasing consumption.
Yet for analysts sceptical of China’s official GDP data, the latest
figures compound that suspicion. They doubt that services could have
remained so strong given the steep declines in the stock market in the
second quarter. Financial services were the biggest contributor to
services growth earlier in the year.
“It is somewhat puzzling how the service sector maintained strong growth
in the third quarter, given that the strong service sector growth in the
first half was mainly driven by the financial sector,” wrote Zhu Haibin,
chief China economist at JPMorgan. “近期股市
“The recent stock market correction should have led to service sector
The statistics bureau is expected to provide a more detailed breakdown
of service sector growth later this week. Julia Wang, greater China
economist at HSBC, notes that the recovery of property sales during the
third quarter probably drove growth in related services like real estate
If services did not grow as fast as official data claim, that implies
the slowdown in manufacturing hit the overall economy faster than the
mild slowdown in the headline figure — to 6.9 per cent from 7 per cent
in the first half and
7.3 per cent in 2014 — indicates.
There is no question that the traditional mainstays of China’s economy
are struggling. Factory output grew at a disappointing 5.8 per cent in
September, barely above the six-year low of 5.7 per cent touched in
Fixed-asset investment, which includes construction of housing,
expansion of factory capacity and infrastructure, grew at 10.3 per cent
in the year to September, the slowest pace since 2000.
Even if services are growing as fast as official data suggest, that is
cold comfort to commodity exporters who rely on Chinese demand for oil,
iron ore and base metals. Relief for those sectors now depends on
further stimulus measures.
Stimulus policies are already in the pipeline. Bank lending to the real
economy accelerated sharply in September, and economists forecast
another interest rate cut before the end of the year. They also expect
the central bank to reduce the share of deposits that banks must hold in
reserve at the central bank, which frees up more funds for lending.
China’s powerful state planning agency has also ramped up spending on
infrastructure to cushion the slowdown in investment in property and
factory plant and equipment,
“Policymakers are signalling that they are serious about defending 7 per
cent growth target,” wrote Larry Hu, China economist at Macquarie