Sunday Observer Online


Sunday, 26 October 2014





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China's economic growth slows

China's economy grew at its slowest pace since the global financial crisis, causing speculation that the government may introduce more stimulus measures.

Gross domestic product rose by 7.3% in the third quarter from a year earlier, compared to 7.5% in the previous quarter, official data showed.

The figure beat market forecasts for 7.2% growth but still marked its weakest performance since March 2009. Industrial production also came in better than analyst estimates.

Manufacturing output rose 8% in September against a year earlier. However, fixed asset investment and retail sales missed expectations.

China's National Bureau of Statistics said retail sales increased 11.6% from a year earlier, compared to forecasts for 11.7%.

The slowdown would have been worse had it not been for a mini-stimulus to bolster the world's second largest economy.

China's leaders are trying to boost domestic consumption and end the economy's reliance on exports and investment for growth. But any major slowdown could lead to rising unemployment, potentially triggering social unrest.

Fixed-asset investment excluding rural households rose 16.1% in the first nine months from a year earlier, below analyst estimates for a 16.3% increase.

Overall, the figures show that growth continues to slow, raising concerns it may have knock-on effects on the strength of the global recovery.

"China's slowdown comes several years after corrections began in other emerging markets," senior international economist for PNC Financial Services Group, Bill Adams said.

"As long as China keeps trending slower like this, it will be difficult for global commodity prices to rise, a persistent headwind for commodity producers like Brazil and Australia," he said.

China's government aims at achieving 7.5% economic growth this year, but many analysts believe that they will not meet the target.

There is also speculation the government may take more steps to boost growth.

Beijing recently introduced measures aimed at stimulating more consumer spending, including relaxing its limits on home purchases and injecting billions of dollars into its biggest banks.

China's Central Bank also cut the interest rate it pays lenders for 14-day repurchase agreements last week.

China economist at Capital Economics, Julian Evans-Pritchard believes problems in the property sector have dragged on growth, but that overall, the broader economy remains 'healthy'.

"We don't think policymakers will panic as a result of the slowdown given that it remains highly concentrated in a few sectors suffering from overcapacity.

The upshot is that although growth has slowed, it reflects a welcome rebalancing away from excess investment in certain sectors of the economy and is not cause for significant concern," he said.


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