Third-Quarter GDP Steady but Might Not Improve in Q4
China's gross domestic product (GDP) growth was steady at 6.7% for the third quarter as the country shifted from an investment-driven economy to one that is consumption-focused. But the pace of growth was the slowest it has been since the second quarter of 2009, and economists said the trend is unlikely to improve by the end of the year.
GDP growth might stabilize at 6.7% in the last quarter, but it will be hampered by a potentially softer property market, which has been restricted by a variety of cooling measures, Liu Liu and Yi Huan, economists at the macro research team of China International Capital Corp. (CICC), told Caixin.
China's housing market contributed 8% to economic growth in the first nine months of the year, National Bureau of Statistics spokesman Sheng Laiyun said Wednesday at a news conference when releasing the GDP figures. The sector became frenzied as home prices have increased in some cities by as much as 40% in August from a year earlier.
Reacting to surging prices, at least 20 cities have tightened home-purchases rules since the end of September with measures that include raising the minimum payment required for a down payment and not allowing residents to buy a second home.
There is no overall data yet to reflect the effectiveness of the new constraints. But Sheng said that home sales in first-tier cities and some smaller ones have started to fall in the first half of October.
Money that would have been spent on homes could go to other sectors, which might continue to support the economy, said Liu Wenqi, a CICC economist, in a written note.
As the property market cools, the related industrial sectors, such as steel and cement, may decline in the near future, said Zhang Lu, an assistant analyst at CEBM Group, a subsidiary of Caixin Insight Group. She predicted that GDP growth might worsen from October to December.
The future of the manufacturing industry is also clouded by a national strategy to trim excess production capacity and a slowdown in investments. In the first nine months, fixed asset investment grew by only 8.2%, with the manufacturing component growing at just 3.3%.
As China shifts toward a consumption-based economy, the government is likely to increase economic stimuli to boost the economy that might be dragged by the property market, Yi said.
The country's central bank has held its lending rate at a record-low 4.35 percent since October and cut its reserve requirement ratio for major banks, with the latest reduction to 17%.
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