China’s economy grew a solid 6.8 per cent in the third quarter as fears of a property bubble eased after government cooling measures, but anxiety about corporate and household debt continued to weigh.
The data came as the country’s ruling Communist Party was meeting for a twice-a-decade congress, at which the prospects for the world’s second-largest economy are a major part of the agenda.
GDP growth in the first three quarters was 6.9 per cent, the same as the first two quarters and within the government range of 6.7 and 6.9 per cent. China is well on track to exceed the government’s annual growth target of 6.5 per cent for 2017.
“It shows that the economy is very resilient,” Xing Zhihong, spokesman for the national bureau of statistics, told a news conference.
He said the country’s economic structure had improved further because of industrial upgrading and improvements in the services sector.
Growth in new construction slowed, while property sales dropped for the first time in more than 2½ years in September.
Retail sales remained strong, expanding 10.4 per cent in the first three quarters, unchanged from a year ago.
Industrial output grew by 6.7 per cent year on year in the first three quarters, up by 0.7 percentage points compared with the same period of last year.
Fixed-asset investment rose 7.5 per cent from January to September, down from 8.2 per cent in the same period of last year.
Speaking at the congress, central bank governor Zhou Xiaochuan warned that undue optimism could cause a “Minsky moment”, referring to economist Hyman Minsky’s idea that booms lead to busts, with asset prices collapsing suddenly after a sustained period of growth.
Debt levels
The governor of the People’s Bank of China warned that corporate debt levels were relatively high and household debt was rising too quickly, but said China would control risks from sudden adjustments to asset bubbles and deal with disguised debt of local government financing vehicles.
Zhou caused a bit of a stir at the weekend when he said that China’s GDP could grow 7 per cent in the second half of the year, and Thursday’s data seem to fly in the face of this example of perhaps excessive optimism.
Also speaking at the congress was Guo Shuqing, chairman of China’s banking regulatory commission, who restated China’s commitment to reforming the banking system to make it easier for foreign banks to operate.
He said the falling market share for overseas banks in China was bad for competition and the regulator would give foreign banks “more room” in equity ownership and business scope.
Economists have been closely watching the party congress, which is expected to secure president Xi Jinping’s grip on power, for indications in relation to future policy.
In the end, Xi’s 3½-hour speech on Wednesday did not contain a specific GDP target, but said that China was aiming to be a modern socialist economy by 2035 and a great socialist economy by 2050.
Wang Tao at UBS said the focus was on achieving “a moderately prosperous society” by 2020, including its goal of doubling 2010 GDP by 2020.
“To achieve that goal, we estimate that China only needs to grow by 6.3 per cent per annum from 2018 to 2020, and thus expect the government to soften its growth target at the margins for 2018,” Wang wrote. – (Additional reporting: agencies)
