China’s economic growth dipped below seven per cent for the first time since the global financial crisis yesterday, hurt partly by cooling investment, raising pressure on Beijing to further cut interest rates and take other measures to stoke activity.
The world’s second-largest economy grew 6.9 per cent between July and September from a year ago, the National Bureau of Statistics said, slightly better than forecasts of a 6.8 per cent rise but down from seven per cent in the previous three months.
That hardened expectations that China would avoid an abrupt fall-off in growth, with analysts predicting a more gradual slide in activity stretching into 2016.
“Stronger fiscal spending and more rapid credit growth will limit the downside risks to growth over the coming quarters,” said Julian Evans-Pritchard, an analyst at Capital Economics in Singapore.
Chinese leaders have been trying to reassure jittery global markets for months that the economy is under control after a shock devaluation of the yuan and a summer stock market plunge fanned fears of a hard landing.
Some analysts were hopeful that the third-quarter cooldown could mark the low point for 2015 as a burst of stimulus measures rolled out by Beijing comes into force in coming months, but muted monthly data for September kept such optimism in check.
“As growth slows and risk of deflation heightens, we reiterate that China needs to cut reserve requirement ratio (RRR) by another 50bps in Q4,” economists at ANZ Bank said in a note to clients.
“Looming deflation risk suggests that the People’s Bank of China will also adjust the benchmark interest rates, especially lending rate, down further.”
In its battle against China’s worst economic cooldown in more than six years, the central bank has cut interest rates five times since November and reduced banks’ reserve requirement ratios three times this year.
Despite the spate of easing, yesterday’s GDP reading was still the worst since the first quarter of 2009, when growth tumbled to 6.2 per cent.
While Chinese officials put a brave face on China’s economic woes, describing the slowdown as being “reasonable”, senior leaders have occasionally voiced worries.
President Xi Jinping told Reuters that the government has concerns about the economy and was working hard to address them.
Policymakers think they can stem a rapid rundown of the country’s foreign exchange reserves and ease pressure on the currency by pump-priming the economy to meet this year’s growth target of about seven per cent, sources involved in policy discussions say.
But key parts of the economy are still losing steam.
Factory output in September rose 5.7 per cent from a year ago, missing forecasts for a six per cent rise, and fixed-asset investment (FAI) climbed 10.3 per cent in the first nine months, below estimates of 10.8 per cent.
September retail spending alone bucked the trend, growing at an annual rate of 10.9 per cent, slightly beating forecasts for 10.8 per cent.