China’s economy grew at its slowest pace since the global financial crisis in the third quarter, reviving expectations of further stimulus to avert a stalling of the world’s growth engine.
The world’s second largest economy expanded by 6.9 percent in the July-September quarter, slowing from a 7 percent increase in the previous quarter. The numbers were still better than market expectations.
Analysts polled by Reuters had forecast gross domestic product (GDP) in the world’s second-largest economy would grow 6.8 percent in July-September period from a year earlier.
“As growth slows and risk of deflation heightens, we reiterate that China needs to cut reserve requirement ratio (RRR) by another 50bps in Q4,” ANZ economists Li-gang Liu and Louis Lam, said in a note. A basis point is 1/100th of a percentage point.
“Looming deflation risk suggests that the People’s Bank of China will also adjust the benchmark interest rates, especially lending rate, down further.”
Growth was up 1.8 percent quarter-on-quarter in Q3, China’s National Bureau of Statistics (NBS) said on Monday. This compared to a Reuters forecast of 1.7 percent, down from a revised 1.8 percent in the second quarter.
Bureau spokesman Sheng Laiyun told Reuters that China faced increased downward pressure on exports, and the government needed time to absorb excess capacity in traditional industries.
The survey-based unemployment rate in China was around 5.2 percent in September, Sheng added.
The government has set its annual economic growth target at “around 7 percent” for 2015, but at the weekend Chinese Premier Li Keqiang admitted that with the global economic recovery losing steam, hitting such a target was “not easy.”
Additional data released Monday showed that fixed-asset investment (FIA) growth eased to 10.3 percent year-on-year in the Jan-September period, missing market expectations. Analysts polled by Reuters predicted investment growth would come in at 10.8 percent, compared with 10.9 percent posted the prior month.
Industrial output growth also cooled more than expected to 5.7 percent, disappointing analysts who expected it to rise 6 percent on an annual basis after a rise of 6.1 percent the prior month.
Retail sales quickened to 10.9 percent. Analysts forecast they would rise 10.8 percent on an annual basis after a rise of 10.8 percent the prior month.
Asian shares outside Japan turned positive after the GDP beat. TheShanghai Composite rebounded 0.5 percent, while the CSI300 Index of the largest listed companies in Shanghai and Shenzhen advanced 0.7 percent and the smaller Shenzhen Composite moved up 0.4 percent.
Australia’s S&P ASX 200 index erased losses to edge up above the flatline. The Australian dollar also got an upward lift, traded at $0.7259 versus the greenback, compared with $0.7241 prior to the data releases.
South Korea’s Kospi also moved into the flat-zone.
Some commentators were skeptical of the numbers produced by China’s statistics bureau, however.
“Quelle surprise,” Dow Jones quoted Michael Every, Asia head of financial markets research at Rabobank, as saying. “That 6.9 percent figure looks very convenient.”
China’s stock market went into meltdown between June and August, triggered by a host of factors, including an unwinding of margin trades and concerns over lofty valuations. This, analysts said, would likely have reduced the financial sector’s contribution to third-quarter growth.
Aside from financial sector woes, a sluggish real estate market continues to weigh on the economy. Real estate is linked to dozens of other key sectors, including steel and cement, that are already grappling with oversupply.
While property sales and prices have been on the rise in response to increasingly accommodative housing policy, housing construction is still in the doldrums. Given the large inventory of unsold housing, strong housing sales momentum for a sustained period was needed before housing construction could recover meaningfully, according to Oxford Economics.
On the bright side, consumption was holding up on the back of robust wage growth, helping to cushion the blow from weakness elsewhere in the economy, economists said.