China’s rapid growth eased last quarter to a still-robust 9.1 percent – enough to ease concerns of an abrupt economic slowdown, but too little to buoy the troubled West.
Growth in the three months through September was down from the previous quarter’s 9.5 percent and the lowest level in two years, data showed yesterday. The government said that was in line with plans to steer growth that hit 10.3 percent last year to a more sustainable level and cool inflation.
“This means China itself is still growing well and will continue to generate demand for commodities and exports,” said Darius Kowalczyk, senior economist for Credit Agricole CIB in Hong Kong. Still, he said, “I don’t think they are going to save the world.”
Beijing has repeatedly hiked interest rates and imposed curbs on construction and other investment to prevent runaway growth and limit inflation that surged to a 37-month high of 6.5 percent in July. It has promised to ease some bank lending curbs to help small businesses, but analysts expect it to maintain most of its controls.
A government spokesman said the latest data was evidence Beijing’s strategy was working and the economy was on the right track.
“There is quite a strong possibility for China’s economy to maintain steady and relatively fast growth,” said a spokesman for the National Statistics Bureau, Sheng Laiyun, at a news conference. Sheng warned China faces “rising risks” due to weakness in key U.S. and European export markets. But he said it is unlikely to suffer a “double dip,” or relapse into an economic slump.
China is forecast to account for about one-third of global growth this year. But analysts caution that its consumption and investment are too small to offset lower U.S. and European demand. Its multibillion-dollar trade surplus also limits benefits for its trading partners.
Hard to make up for lost ground
Deutsche Bank economist Ma Jun has estimated China would have to grow by 18 percent this year to make up for a 3 percentage point drop in U.S. and European growth. The International Monetary Fund (IMF) is forecasting China’s growth this year at 9.5 percent, compared with just 1.5 percent for the United States and a 0.5 percent contraction for Japan.
China’s retail sales rose 17 percent in September, slightly ahead of the growth rate for the first half of the year, data showed. Factory production rose 14.2 percent over a year earlier for the quarter.
China’s exporters have been hurt by weak global demand that saw September export growth tumble to 17.1 percent from August’s 24.5 percent. But Sheng said retail sales and other indicators showed the government’s efforts to reduce reliance on trade by boosting domestic consumption were gaining traction.
Premier Wen Jiabao promised last weekend to help exporters by maintaining a “stable exchange rate,” a move that might fuel tensions with Washington over Beijing’s currency controls.
China’s inflation eased to 6.1 percent in September, though food price inflation held steady at August’s level of 13.4 percent. Analysts expect inflation to ease further as the autumn harvest comes in.
China’s demand for iron ore, industrial components and other foreign goods already has eased as the government clamped down on a construction boom. Export-driven manufacturers that account for half of the country’s imports have reacted to lower orders by cutting purchases of supplies.
Imports of polyester fell 21.7 percent in September from a year earlier while imports of unrefined aluminum declined 7.9 percent, according to customs data. Growth in oil imports declined from last year’s double-digit rates to 4 percent.
Weaker Chinese demand is likely to hit other Asian economies that supply its factories industrial components, as well as Australia, Chile and other exporters of minerals such as iron ore and copper.