Economy continues to stabilize as Q3 GDP grows 6.7 percent

Gov't spending still stimulating growth with infrastructure investment

China posted a GDP growth of 6.7 percent for the third quarter and the first nine months of the year, as its economy continued to stabilize amid a deepening process of restructuring.

The third quarter GDP remained the same as the first and second quarters, according to National Bureau of Statistics (NBS) spokesman Sheng Laiyun.

China's economy grew by 6.9 percent in 2015, its slowest growth in a quarter of a century.

"In the first three quarters, overall GDP growth, inflation at 2 percent, a survey-based unemployment rate of around 5 percent and a continuing trade surplus point to a generally good economic picture," Sheng said at a press conference Wednesday.

In September, China's survey-based unemployment rate dropped for the first time since June 2013 to below 5 percent.

Experts said the NBS data showed support policies have had an impact on the economy and an "L-shaped" recovery is shaping up.

Marie Diron, associate managing director at Moody's Investors Service, said direct and indirect policy stimulus continued to support GDP growth at a steady 6.7 percent in the third quarter.

"As was the case in the first half of the year, fixed-assets investments by State-owned enterprises continues to rise sharply, an indication of indirect policy support to the economy. The large increase in infrastructure investment also shows where government spending is stimulating growth," Diron wrote in a research note e-mailed to the Global Times Wednesday.

Xu Hongcai, deputy chief economist of the China Center for International Economic Exchanges, told the Global Times Wednesday that the industrial sector is showing positive signs amid the nation's sweeping campaign to tackle overcapacity and structural issues of its industrial sector.

China's producer price index (PPI), which measures wholesale prices, ended a 54-month decline in September, according to NBS data released on Friday.

"The PPI pickup reflected reduced pressure from deflation, signifying a significant change in industrial supply-demand dynamics," Xu said.

Even private investments, which raised flags earlier in the year as it drastically slowed down, showed an uptick, posting a growth rate of 2.5 percent during the January-September period, compared with 2.1 percent from January to August, according to the NBS.

Restructuring

China's industrial structures continue to improve in the third quarter, Sheng said.

The services sector contributed 52.8 percent to the GDP during the first three quarters, up 1.6 percentage points from last year.

The value-added of high-tech industries and the equipment manufacturing sector continued to grow faster than the industrial average and expanded proportionally.

During the first three quarters, consumption further expanded its share as a contributing factor, showing positive adjustments in terms of demand structure, Sheng said.

Diron said that a rebalancing is expected to continue at a similar gradual pace in the next two years.

"In the long term, economic rebalancing, corporate debt and less favorable demographics will be some of the factors which could dampen GDP growth," Diron noted.

To push forward with restructuring, fiscal policies, such as lowering taxes and anti-poverty measures should be implemented in a timely fashion in the fourth quarter, Xu said.

A surge in property sales is believed to be underpinning the economy, and a cooling down of the market following recent restrictions on home sales also raised concerns over performance in the fourth quarter. The housing sector posted a year-on-year growth of 26.9 percent in terms of floor space sold in the first three quarters, and the sector contributed about 8 percent to GDP growth, according to Sheng.

"Although household debt remains low, the increased reliance on construction and real estate activities exposes the economy to a reversal in these markets," noted Diron.

Adjusting the annual GDP growth forecast at 6.6 percent from 6.5 percent, analysts at Nomura noticed signs of momentum losing steam in September, notably in industrial production and retail sales.

"The boost from post-flood reconstruction has been fading and the recent crackdown on the overheated property market should start to put pressure on property sales," they said in a research note sent to the Global Times.