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October 20, 2017

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Economy on course to faster growth

CHINA’S economic growth looks set to accelerate for the first time in seven years this year, after GDP growth stayed stable in the third quarter, buoyed by strength in retail spending.

The country’s gross domestic product expanded at a robust 6.8 percent annual pace in the three months ending in September, a marginal change from the previous quarter’s 6.9 percent, according to data released by the National Bureau of Statistics yesterday.

This is the ninth straight quarter that China has seen growth of 6.7-6.9 percent, maintaining medium-high growth and adding to evidence of further economic resilience, bureau spokesman Xing Zhihong told reporters.

In the first three quarters combined, the economy expanded 6.9 percent year on year, holding steady from a 6.9 percent increase in the first half of the year.

The economy is expected to comfortably beat the government’s 2017 target of around 6.5 percent and 2016’s 6.7 percent, which was a 26-year low.

“The Chinese economy has maintained steady growth with a positive outlook in the first three quarters,” Xing said.

“The sound economic expansion in the first three quarters has “further laid a solid foundation for achieving the annual development target,” Xing said.

Economic structure and growth quality both improved, he said, and new growth engines are gaining steam as employment had expanded, consumer prices were stable, and the balance of international payments had improved.

Growth in the service sector outpaced the overall GDP to reach 7.8 percent year on year in the first three quarters.

Yesterday’s data also showed that total sales of consumer goods rose 10.4 percent year on year to 26.32 trillion yuan (US$4 trillion) in the first three quarters. The pace was unchanged compared with the same period of last year.

“Consumption demand has become a main engine of China’s economic growth,” Xing said, contributing 64.5 percent of GDP growth, up 2.8 percentage points from the same period of last year.

Last month, retail sales expanded by 10.3 percent year on year, up from August’s 10.1 percent in August.

The bureau attributed the growth partly to booming online sales, which surged 34.2 percent year on year, 8.1 percentage points faster than a year earlier.

Online sales of physical goods rose 29.1 percent to 3.68 trillion yuan in the first three quarters, accounting for 14 percent of total retail sales.

From January to September, retail sales in rural areas rose 12.1 percent, outpacing the 10.1 percent expansion in urban areas.

China is trying to shift its economy toward a growth model driven more by consumer spending, innovation and services while weaning it off reliance on exports and investment.

Fixed-asset investment expanded 7.5 percent in the first nine months, marking the slowest rate of growth since a 6.3 percent reading in December 1999.

Investment growth has slowed in recent years amid efforts by authorities to move from investment-driven economic growth.

But private sector fixed-asset investment continued to lag state spending, slowing to 6 percent growth for the January-September period, compared with 11 percent growth in investment by state firms.

China’s industrial output growth accelerated to a three-month high of 6.6 percent in September, up from 6 percent in August.

In the first three quarters, industrial output expanded 6.7 percent year on year, faster than the 6 percent increase in the same period of last year and flat with that of the first eight months of this year.

Sales of residential property in terms of area rose 7.6 percent in the first three quarters, compared with 13.5 percent in the first half.

Focus placed on quality

Wang Tao, chief China economist with UBS, said GDP growth may moderate to 6.6 percent in the fourth quarter, weighed by a further slowdown of property sales and infrastructure investment.

Wang said President Xi Jinping’s opening speech at the 19th National Congress of the Communist Party of China “was notable for the focus placed on quality and equality of development over the coming years, rather than specific growth targets, though the goal of doubling 2020 GDP from 2010 levels remains.”

“We see the drive to deleverage and incrementally tighten property policy continuing in the coming months. Any policy change, if needed, will likely only come at or after next March’s National People’s Congress, when more information should be available on any potential notable slowdown.”

Julia Wang, China economist for HSBC, said continued manufacturing recovery and strong growth in services and consumption points to a positive outlook in 2018.

“There are signs that underlying demand is still holding up well,” Wang said in a note. “We have turned more positive on growth since last year, arguing that the manufacturing sector is on the cusp of a more structural revival in the next two to four years. So far, data are still broadly supportive of that view.”

Economic indicators for September showed strong expansion in the manufacturing sector as the official Purchasing Managers’ Index rose to 52.4, the highest this year. Growth of imports and exports both accelerated.

China’s average per capita disposable income grew 9.1 percent year on year to 19,342 yuan in the first three quarters, yesterday’s data showed. Deducting inflation, the real growth was 7.5 percent, up 1.2 percentage points from a year earlier. The figure exceeded GDP growth for the same period.

The bureau’s data also showed income gaps between urban and rural residents continuing to narrow, with the real growth of per capita disposable income in rural areas 0.9 percentage points higher than in urban regions.

Per capita consumption averaged 13,162 yuan, up 7.5 percent from a year ago. The inflation-adjusted growth was 5.9 percent.

In the job market, 10.97 million new jobs were created in the first three quarters, nearly completing the annual target of 11 million.


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