China: Economy Displays Renewed Growth Momentum in Q3

Following a lacklustre first half performance, the pace of growth appears to have picked up going into the second half of 2013. This is clearly demonstrated by the latest GDP report showing that activity accelerated at its fastest rate this year in the three months to September. Real GDP growth came in at 7.8% (y-o-y), markedly higher than the 7.5% pace registered three months earlier and the 7.7% posted in the first quarter. The latest GDP figure now takes growth for the first nine months of this year to around 7.7%, putting the economy firmly on track to hit the government’s target of 7.5% for 2013. Earlier in the year, the official growth target was considered to be under threat as the economy continued to lose momentum, but even if this figure is achieved it will be the slowest pace of expansion since 1999. Still, our panellists remain confident that real GDP growth will slightly exceed the official target this year and have kept their forecasts at 7.6%. Although forecasts for 2014 have nudged up to 7.5%, the economy is not expected to accelerate next year. This probably reflects Beijing’s desire to shift towards slower and more balanced growth, which it considers to be more sustainable as China tries to steer its economy towards consumption and away from export and investment.

Although the latest GDP reading is the clearest indication yet that the recovery is back on track, it remains to be seen whether the latest upturn is sustainable. For instance, September data for nominal retail sales, fixed asset investment and industrial production were all slightly down on the readings posted a month earlier. More worryingly, exports unexpectedly fell by 0.3% (y-o-y) in the same month in a sign of weakening external demand for Chinese products.


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