China's Third-Quarter GDP Slows, but Better than Expected

China's gross domestic product (GDP) slowed further in third-quarter 2015. The real GDP grew 6.9% year-on-year, down from 7% in the first two quarters. Although it did better than the 6.7% some analysts predicted, it’s the slowest rate since 2009.

Preliminary data show output growth continued to slow in the secondary sector, which includes manufacturing, mining and construction, while growth in services output continued to pick up for the fourth-consecutive quarter.

NACM economist, Chris Kuehl, questions whether China is really slowing to less than 7% growth, however. “It appears that way, but to be honest nobody is really sure,” Kuehl said. “The Chinese economy is vast and hard to assess.” Some analysts believe China’s GDP growth is “slower than many had believed—maybe growth as anemic as 5%,” he noted. But others believe its economy has been underreported, he added. “… and may be growing at 8% or 9%.”

Transitioning to an economy “dependent on its own consumer” has been challenging, Kuehl said. “It is far easier to tally up the exports of a country than to assess the activity of the domestic consumer—just ask those who have to revise the U.S. growth numbers three and four times.”

Ron Shepherd, FCIB's director of membership and business development, agreed. “While economists and analysts examine China’s third-quarter GDP growth for clues to the economy’s future, it is very clear that the goal of transitioning from an export and infrastructure focused economy to an internal consumption powered one continues to be a tremendous challenge," Shepherd said. "The second-largest economy in the world, like a huge battleship, will take time to turn and will not be without confusing and contradicting  data, which will be reported over many quarters and years."

Kuehl added that he believes the Chinese government could stimulate the country’s economy, if it chooses to do so. Presently, it’s focusing on inflation rather than growth. “The Chinese have options although they are not as clear as they once were,” he said.

A long-term slowdown could continue. Wells Fargo analysts’ forecast sees continued gradual deceleration over the next few years and for “the renminbi to depreciate modestly vis-à-vis the greenback in the coming quarters.” Next week, the 18th Central Committee of the Communist Party of China plans to hold its fifth annual plenary session, where it will announce the country’s 13th five-year plan. The plenum will help set China’s GDP growth rate for the next five years.

- Diana Mota, NACM associate editor

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