News Room - Business/Economics

Posted on 21 Oct 2008

China Q3 GDP slows to 9%

China’s growth rate slowed to 9% in the third quarter, dragged down by the global credit crisis and a weak property sector, leaving the economy on course for its first year of single-digit expansion since 2002.

 

The fall in annual gross domestic product (GDP) growth, from 10.1% in the second quarter, confirmed that China cannot decouple from worldwide trends and reinforced expectations the government would soon ease monetary and fiscal policies.

 

Annual growth in the first nine months was 9.9%, well down from 11.9% in all of 2007, the National Bureau of Statistics (NBS) said yesterday.

 

“I’m looking for slower growth in the fourth quarter because that’s when I think the external side will start to show a more negative impact,” said Tao Wang, an economist at UBS Securities in Beijing.

Workers go about their chores at a construction site in Hefei, eastern China's Anhui province. - AFP

 

“A gloomy outlook lies ahead after the third quarter, and concerns about the slowdown now outweigh concerns about inflation,” said Chen Jinren, an analyst at Huatai Securities.

 

Interpreting the third-quarter statistics is tougher than usual because Beijing pulled out all the stops to reduce pollution during August’s Olympics. This led to extensive factory closures as well as transport and visa curbs that hit output.

 

Industrial production slowed to 11.4% in the year to September, the lowest rate since 2002, suggesting the economy was losing momentum as the quarter went on. However, the pace of retail sales and fixed-asset investment growth both accelerated last month, beating forecasts and providing reassurance to policymakers counting on domestic demand to take up the slack from falling exports.

 

China has been accounting for about a quarter of additional global output in recent years, devouring iron ore, oil and other raw materials.But headwinds have been stiffening.

 

“The weak global economic environment has definitely had a negative effect on China’s own economic growth,” the statistics bureau spokesman Li Xiaochao told a news conference.

 

The property market is in a swoon due to tight credit and government curbs aimed at preventing the sort of bubbles that have brought down the US and British economies.

 

Real estate accounts for about a quarter of fixed-asset investment, so the repercussions for the construction, metals and power sectors have been severe. Steel and aluminium companies have slashed output because of slumping prices.

 

Officials confirmed over the weekend the government was preparing measures to pump up growth, including tax cuts and stepped-up investment in infrastructure such as railways. Curbs on the real estate market are already being eased in some cities.

 

Economists also expect more monetary easing, building on two cuts in interest rates and banks’ required reserves since mid-September, as the threat of inflation recedes.