China’s economy grew at its quickest pace this year between July and last month, underpinned by investment, although analysts question if the vigor would continue in coming months.
The world’s second-largest economy grew 7.8 percent in the third quarter from a year earlier, in line with expectations, data from the National Bureau of Statistics showed yesterday.
So far this year, investment has accounted for more than half of the expansion, showing the challenges faced by Beijing in trying to restructure the economy toward consumption, which policymakers expect to provide more sustainable growth in the years ahead.
After slipping in eight of the last 10 quarters, analysts said growth may fall once again in the October-to-December period.
Exports are expected to soften and authorities may also rein in credit expansion after inflation pushed to a seven-month high.
“The growth peak was behind us in the third quarter,” an economist at Bank of America-Merrill Lynch, Lu Ting (陸挺), said.
“We believe the People’s Bank of China will slightly shift its monetary policy from a moderate expansion in the third quarter to a neutral stance,” he said.
After three decades of double-digit expansion fueled by exports and investment, Beijing is trying to shift or “restructure” the economic mix so that activity is geared much more to consumption.
That means the economy has slowed down compared with previous years, although sluggish global demand has provided an added weight dragging on China’s growth.
For the first nine months, the economy grew 7.7 percent, keeping it on track to achieve the government’s growth target of 7.5 percent this year, far outperforming other major economies, but still the worst performance for China in 23 years.
The fragility of China’s latest economic revival comes as no surprise. Exports suffered a surprise fall last month after demand from emerging nations crumbled on volatile financial markets, a trend the government said this week is expected to last.
And with the yuan hitting a record high yesterday for the fifth consecutive day, powered in part by strong capital inflows, Chinese exporters may face a tougher time yet as the rising currency erodes their competitiveness.
“The economy is facing a complex and uncertain domestic and international environment,” a spokesman for the National Bureau of Statistics, Sheng Laiyun (盛來運) told a briefing.
“In addition, we have accumulated chronic structural imbalance problems in our economy and need to deepen reforms to address them,” Laiyun added.
The latest data shows China is still a long way from having consumption as the mainstay driver of growth.
For the first nine months, consumption accounted for 46 percent of growth, much less than the 56 percent taken up by investment. Exports, on the other hand, subtracted 1.7 percent.
Investment in the property sector, where prices are at record highs, despite measures to calm the market, appeared to be especially buoyant.
“We think the recovery in the third quarter was mainly driven by the strong momentum of the property market,” chief China economist with Mizuho Securities in Hong Kong, Shen Jianguang (沈建光), said.
Underscoring strong growth in the real-estate industry, the sector accounted for 15.8 percent of the economic activity in the first nine months, up from 14.8 percent in the first half of the year.