Growth rate moderates as inflation picks up
By Wang Yanlin |
October 22, 2010, Friday
|
Print Edition
Print Edition
CHINA'S economy in the third quarter expanded 9.6 percent, its slowest pace in a year, amid government efforts to steer a middle road of stable growth.
However, inflation hit a 23-month high in September, a reminder of the risks that remain in guiding the world's second-largest economy through the most fitful economic era in decades.
In a speech posted on the People's Bank of China website yesterday, central bank Governor Zhou Xiaochuan said China is facing a "challenging time." He cited the risks of excess liquidity, inflation, asset-price bubbles and the influx of speculative, or "hot money," funds.
Still, the 9.6 percent growth in gross domestic product in the last quarter would have come as welcome news to government policymakers who grew concerned about overheating when first quarter GDP came in at a sizzling 11.9 percent. That pace slowed to 10.3 percent in the April-June period.
"The third-quarter growth rate is slightly above market expectations," said Matt Robinson, a senior economist at Moody's Analytics.
Both forecasts and performance remain above the government target of 8 percent growth for 2010. For the first nine months of the year, the economy expanded 10.6 percent from a year earlier to 26.8 trillion yuan (US$4 trillion).
"China seems all but certain to exceed the government's target growth rate," Robinson said.
GDP dominated a battery of data released yesterday by the National Bureau of Statistics. The figures also showed industrial production and infrastructure spending moderated last month, and retail sales were relatively steady. Industrial production growth slowed to 13.3 percent from 13.9 percent in August, and retail sales edged up 18.8 percent from 18.4 percent a month earlier.
"China has managed to shield its economy from the risk of overheating," said Sheng Laiyun, a spokesman at the National Bureau of Statistics. "Economic growth has stabilized from neither a steep climb nor a dramatic fall."
Still, inflation remains a thorn. The consumer price index, on an annual basis, jumped 3.6 percent in September, widening from a 3.5 percent gain in August. That kept the real rate of interest on bank deposits negative for the eighth month.
"China's determination to balance its growth rate with the quality of growth has been reflected in this batch of data," said Li Maoyu, an analyst at the Changjiang Securities Co. "The slower pace of industrial production and investment is the result of structural reform. But a real source of worry is inflation."
To tame inflation and try to deflate a property price bubble, the central bank announced an unexpected interest rate increase on Tuesday evening. It was the first rise in rates in 34 months.
The government is engaged in a juggling act. It wants to slow growth to an orderly pace while restructuring income distribution to be more equitable between rich coastal cities and poorer inland areas.
However, inflation hit a 23-month high in September, a reminder of the risks that remain in guiding the world's second-largest economy through the most fitful economic era in decades.
In a speech posted on the People's Bank of China website yesterday, central bank Governor Zhou Xiaochuan said China is facing a "challenging time." He cited the risks of excess liquidity, inflation, asset-price bubbles and the influx of speculative, or "hot money," funds.
Still, the 9.6 percent growth in gross domestic product in the last quarter would have come as welcome news to government policymakers who grew concerned about overheating when first quarter GDP came in at a sizzling 11.9 percent. That pace slowed to 10.3 percent in the April-June period.
"The third-quarter growth rate is slightly above market expectations," said Matt Robinson, a senior economist at Moody's Analytics.
Both forecasts and performance remain above the government target of 8 percent growth for 2010. For the first nine months of the year, the economy expanded 10.6 percent from a year earlier to 26.8 trillion yuan (US$4 trillion).
"China seems all but certain to exceed the government's target growth rate," Robinson said.
GDP dominated a battery of data released yesterday by the National Bureau of Statistics. The figures also showed industrial production and infrastructure spending moderated last month, and retail sales were relatively steady. Industrial production growth slowed to 13.3 percent from 13.9 percent in August, and retail sales edged up 18.8 percent from 18.4 percent a month earlier.
"China has managed to shield its economy from the risk of overheating," said Sheng Laiyun, a spokesman at the National Bureau of Statistics. "Economic growth has stabilized from neither a steep climb nor a dramatic fall."
Still, inflation remains a thorn. The consumer price index, on an annual basis, jumped 3.6 percent in September, widening from a 3.5 percent gain in August. That kept the real rate of interest on bank deposits negative for the eighth month.
"China's determination to balance its growth rate with the quality of growth has been reflected in this batch of data," said Li Maoyu, an analyst at the Changjiang Securities Co. "The slower pace of industrial production and investment is the result of structural reform. But a real source of worry is inflation."
To tame inflation and try to deflate a property price bubble, the central bank announced an unexpected interest rate increase on Tuesday evening. It was the first rise in rates in 34 months.
The government is engaged in a juggling act. It wants to slow growth to an orderly pace while restructuring income distribution to be more equitable between rich coastal cities and poorer inland areas.
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