Growth in China's juggernaut economy could again hit dangerous speeds even though official data yesterday showed a slowdown in the rate of expansion to 10.4 percent in the third quarter, analysts said.
Asia's second-largest economy and the world's fourth biggest grew by 10.7 percent in the nine months to last month, coming off its blistering pace of 11.3 percent in the three months to June and 10.9 percent in the first half.
The government said the slowdown in GDP growth was due to a range of measures taken this year, including two interest rates hikes, that aimed to rein in near spendthrift rates of investment and lending.
"Since the beginning of this year, the central government has implemented a series of macro-economic control measures and they have seen initial success in the third quarter," National Bureau of Statistics spokesman Li Xiaochao said at press conference to announce the numbers.
Frenetic investment and over-production have long been major concerns for the government, worried that overheating could emerge in crucial sectors such as real estate at the risk of inflation and a fresh round of bank bad debt.
Working in Beijing's favor was a slowdown in the main culprit, fixed asset investment -- projects involving infrastructure such as roads, factories and power plants.
Total fixed asset investment rose 27.3 percent in the nine months to last month, compared with a 30.9 percent rate in the second quarter.
Investment in urban areas grew 24.2 percent in the third quarter year-on-year compared with 31.9 percent in the second.
At the same time industrial output, which accounts for over 40 percent of China's more than US$2 trillion economy, eased to 16.2 percent growth in the third quarter and 17.2 percent for the nine months after 17.7 percent in the first half.
Analysts said the figures do suggest that the government's policies are gaining some traction but they doubted if a sustained slowdown was possible without the use of more hardline measures.
Gao Shanwen, an economist with Everbright Securities in Shanghai, predicted that the government would have to get much tougher in the coming quarters if it was serious about bringing free-spending state enterprises to heel.
"We doubt the slowdown will be sustainable and the government might have to take more measures to restrain a rebound in the future," Gao said. "There will be a rebound not only because enterprises are determined to expand but also because most administrative policies are just not that sustainable."
One of the difficulties for Beijing is that while its wants to prevent the kind of all-out economic gallop that could bring on a meltdown, they are wary of slamming the brakes on too hard and causing a severe shock to the country.
"The Chinese government does not want to kill the momentum but they don't want the economy to continue accelerating," said Chen Xindong (
This is particularly true given central government polices aimed at promoting growth in the poorer central and western regions of the country.
"There is very strong growth momentum in the middle and west of China because the central government is in fact encouraging this growth in one way or another," said Shen Minggao, an economist based in Beijing for Citigroup.
"They are trying to spread the growth from the coastal areas to the inland provinces which in general is causing enthusiasm for investment in those provinces."