BBC: China's economic growth slows to 6.9%

China Labour Bulletin is quoted in the following article. Copyright remains with the original publisher.

19 October 2015


China's economy grew 6.9% in the third quarter, the weakest rate since the global financial crisis.

The year-on-year growth rate is also below the government's 7% target.

Though slightly above expectations, the data is expected to raise pressure on policymakers to step up monetary policy to stem the slowdown.

China's economy has been hit by extreme stock market volatility over the summer and weak economic data, causing concern on markets around the world.

Most analysts were expecting growth figures of 6.8% for the July to September period.

The latest growth figure comes after a slew of disappointing data out of China. Earlier in the month, manufacturing data suggested the sector continued to contract for September.

Imports saw a sharp fall for the past month while inflation eased by more than expected, adding to fears of a rapid slowdown in the world's second largest economy.

China has been attempting to shift from an export-led economy to a consumer and services-led one.

Beijing set an official growth target of "about 7%" for the overall year but Premier Li Keqiang said a lower growth rate was also acceptable, as long as enough new jobs were created.

"In order to restructure, the economy will face some downward pressure," Sheng Laiyun, a spokesman for the Chinese statistics agency, told reporters.

But despite a slowdown in the industrial sector, Mr Sheng said the services sector is expected to grow rapidly.

"All this indicates the restructuring and upgrading of the Chinese economy are going steadily."

However, analysts say the steep fall in imports suggests domestic demand is not as strong as the government would have hoped.

Any Chinese growth, if real, now has a disproportionate impact on the global economy.

And the corollary, of course, is that any slowdown beyond what's expected by client economies all over the world - manufacturers like Germany, commodity producers like Brazil - engenders disproportionate pain.

The point is that China, on the purchasing power parity measure which attempts to assess physical output undistorted by exchange rate movements, is the world's biggest economy, according to the World Bank - representing 16.7% of global GDP or output, compared with 16% for America (which is still the number one economy on the conventional GDP measure).

This means that if its current GDP growth is accurate, China is actually contributing a little bit more to global growth at its new putative expansion rate rate of 6.9% than it did in the boom years of 2003-7, when its economy was growing at the hair-raising rate of 11.7%.

Or to put it another way, China today is in theory contributing more than one percentage point of global GDP expansion compared with almost exactly one percentage point just before the 2008 debacle.

The slowdown comes despite repeated interest rate cuts and other stimulus measures introduced by Beijing.

"The government's measures helped dampen the downside pressures but the problem is that these pressures on growth are actually pretty severe," Louis Kuijs of Oxford Economics told the BBC.

They could be seen in the industrial production data, in heavy industry and other sectors, he explained.

"What keeps China going at the moment is consumption but this can not fully offset those negative pressures on growth and therefore - even though we see some stimulus coming from the government and we see that having some impact - it's not enough to prevent growth from sliding further."

In the second quarter, growth did beat expectations, coming in at 7% from the previous year, matching growth in the first three months of the year.

Economists are, however, continuing to call for more government action, as volatility in the stock markets sparks concerns of financial turmoil and potential social unrest.

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