China’s economy grew by 7.8 per cent in the third quarter, the fastest growth recorded this year so far, in an indication that the world’s second largest economy has, in 2013, continued to weather the downturn successfully, even as it struggles to make headway in addressing more difficult long-term challenges.
China’s gross domestic product (GDP), after nine months, has recorded 7.7 per cent growth, according to new figures released by the official National Bureau of Statistics (NBS) on Friday.
The government is now set to achieve its 7.5 per cent annual target, with growth in the third quarter reaching 7.8 per cent, rising from 7.5 per cent in the previous quarter.
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Whether or not the economy will continue growing at this pace has divided economists here, particularly with the government hoping to accelerate “restructuring” of the economy and making growth less dependent on State-led investment, easy credit and exports. Fixed asset investment fell slightly last month, although still marking 20.2 per cent growth.
Research firm Capital Economics in a note said a slowdown in the fourth quarter was a possibility, but added that such an outcome would be welcome. “The more interesting development was the slowdown in infrastructure investment in September amid broader signs that the momentum of the economic rebound is already fading,” the firm said. “A slowdown in growth in the fourth quarter would probably re-awaken fears of a hard landing but we would welcome it. A prolonged surge in credit-fuelled investment is the last thing China now needs.”
Economists here expect the government to tighten monetary policy towards the end of the year. In November, the Communist Party is expected to meet and discuss a slew of economic reforms at its “third plenum”, with the aim of taking forward its objective of restructuring growth.
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Analysts at Nomura, the Japanese financial firm, said in a note on Friday that the third quarter’s 7.8 per cent growth was mainly driven by government spending, contrary to Beijing’s rebalancing objectives, and that this quarter would mark the end of the Chinese economy’s recovery. This was reflected in industrial production growth falling to 10.2 per cent last month from 10.4 per cent in August, and fixed asset investment growth falling to 20.2 per cent from 20.3 per cent. Retail sales had also fallen to 13.3 per cent from 13.4 per cent.
“We expect the government to cut its growth target for 2014 to 7 per cent in December,” the firm said, “in an effort to contain financial risks such as local government debt risk”.