Economic resilience to offset turbulence

17 january 2013

An oil equipment manufacturing plant in Guanghan, Sichuan province. China’s economy expanded 7.4 percent year-on-year in the third quarter, slowing from 7.6 percent in the second quarter and 8.1 percent in the first. Yu Ping / for China Daily

Macro indicators point to strong growth, demand pickup in China during fourth quarter, economists say

Higher retail sales and a continued investment pickup during the fourth quarter will provide enough cushion for China to ride out the economic turbulence and post solid full year growth numbers, economists say.

The prediction comes after China’s economic growth slowed for the seventh straight quarter, and fell below the government target for the first time since the global financial crisis, to 7.4 percent from 7.6 percent in the second quarter. The lower numbers also sparked fears that China may not be able to achieve the government target of 7.5 percent GDP growth for the full year.

“It was the weakest quarter for China in terms of year-on-year growth,” says Stephen King, global chief economist at HSBC.

According to King, GDP growth is likely to accelerate from the fourth quarter and extend well into the next year on the back of government stimulus measures. King, however, expects the acceleration to be modest and more along the lines of the numbers seen in 2009 and 2010.

“Exports continue to be in a tailspin and exporters are reeling from heavy losses, not only in China, but all over the world. It is a situation that has caught everyone by surprise and losses have come much earlier than expected,” he says.

However, other indicators released alongside the GDP during the third quarter have been showing recovery signs, indicating that stimulus efforts are finally paying off.

Fixed-asset investment, a key sign of construction activity and demand for machine equipment, rose marginally to 20.5 percent during the first nine months of the year, compared with 20.1 percent during the first eight months. But the numbers are still lower than the 25 percent mark that prevailed for most of 2011.

Industrial value-added output surpassed economists’ year-on-year estimate of 9 percent to 9.2 percent in September and higher than the 8.9 percent recorded in August.

Consumption continued to be on firm ground, with the nine-month retail sales posting a year-on-year growth of 14.2 percent, and higher than the 13.2 percent in August.