by Ellen Zhang and Kevin Yao
BEIJING (Reuters) – China’s economy grew in the third quarter at its slowest pace in a year, as expected, as a prolonged housing crisis and trade tensions with the United States hurt demand, maintaining pressure on Beijing to deploy additional support measures.
Chinese authorities have unveiled rather modest economic measures this year, supported by the resilience of exports and the solidity of stock markets.
But the resurgence of trade tensions with the United States represents a risk for the world’s second largest economy, especially since China intends to rebalance its economy in the long term to promote consumption – a major challenge.
According to official data released on Monday, China’s gross domestic product (GDP) grew at an annual rate of 4.8% in the third quarter, a pace in line with analysts’ expectations. Growth stood at +5.2% in the previous quarter.
On a quarterly basis, Chinese GDP grew by 1.1% over the July-September period, data from the National Bureau of Statistics (NBS) show. The consensus gave an increase of 0.8% after a gain of 1.0% in final reading in the previous quarter.
Beijing has set an annual growth target of around 5%.
While the Chinese government still has room for additional support measures, analysts differ on whether or not Beijing decides to act by the end of the year.
“SIGNAL”
“The market view was that China was going to miss its target no matter what. Even with a stimulus, (growth) would be less than 5%,” commented Dan Wang, Eurasia Group’s China director.
“But looking at the data for the first three quarters, the economy will meet the target, suggesting that China can withstand any pressure from the United States, even with such threats of tariffs and export restrictions,” he continued.
“Beijing is sending a signal that it is capable of achieving its development goals and is firmly committed to its policies.”
The resurgence of Sino-American trade tensions has highlighted the vulnerabilities of the Chinese economy, which depends greatly on its manufacturing production and external demand.
While Chinese export growth rebounded in September, most recent data shows that the world’s second-largest economy is running out of steam. Deflationary pressures have persisted despite efforts to limit overproduction and excessive competition among firms.
Although the data appears reassuring, Chinese exporters are already feeling the impact of customs surcharges imposed this year by the United States, with the result, for many, of finding new markets.
US President Donald Trump has threatened to increase tariffs on products from China by 100% starting November 1. Representatives in Washington, however, signaled that both sides were willing to ease trade tensions.
Separate data also published on Monday showed that Chinese industrial production increased in September to a three-month peak, with an increase of 6.5% above the consensus which stood at +5.0% after +5.2% in August.
Retail sales, for their part, slowed to a ten-month low, increasing as expected by 3.0% last month, compared to +3.4% in August.
(Ellen Zhang and Kevin Yao; Jean Terzian)
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