China: Economy remains on track for soft landing
October 18, 2011
In the third quarter, GDP expanded 9.1% over the same period last year (Q2: +9.5% year-on-year), which represented its slowest rate since the second quarter in 2009 and continued to support the notion that China is heading to more sustainable growth levels. While the reading fell short of market expectations of a 9.2% rise, the still strong third quarter print helped to ease concerns about a hard landing. Although the National Bureau of Statistics does not provide a breakdown for GDP by expenditure, additional data suggest that investment remains the main economic growth engine. In the first nine months of 2011, urban fixed-asset investment growth, which includes capital and construction investment, moderated to 24.9% in nominal terms (January-June: +25.6% yoy). In addition, private consumption remains resilient as retail sales accelerated to 17.0% in the same period (January-June: +16.8% yoy). Net exports appeared to have reduced their contribution in the first nine months to September, as exports growth continued to moderate in Q3, while imports picked up. At the sector level, the January-September period saw the industrial sector moderating to a 10.8% increase over the same period last year (Q2: +11.0% yoy), while services slowed to 9.0% (Q2: +9.2% yoy). Meanwhile, agriculture accelerated to 3.8% (Q2: +3.2% yoy). A quarter-on-quarter analysis corroborates the slight slowdown suggested by the annual figures, as GDP expanded a seasonally adjusted 2.3% in the third quarter, a notch below the 2.4% recorded in the second quarter. The 12th Five-Year Plan, which was approved on 14 March, set an economic growth target of 8% for this year and to average at around 7% in the 2011-2015 period.