Chinese economy grows at slowest pace since 2009

Updated October 20, 2018

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Chinese President Xi Jinping. — Photo/File
Chinese President Xi Jinping. — Photo/File

BEIJING: China’s economic growth cooled to its weakest quarterly pace since the global financial crisis, with regulators moving quickly to calm nervous investors as a years-long campaign to tackle debt risks and the trade war with the United States began to bite.

Chinese authorities are trying to navigate through numerous challenges, as the trade war fears have sparked a blistering selloff in domestic stock markets and a steep decline in the value of the yuan versus the dollar, heightening worries about the growth outlook.

The economy grew 6.5 per cent in the third quarter from a year earlier, below an expected 6.6 per cent rate, and slower than 6.7 per cent in the second quarter, the National Bureau of Statistics said on Friday.

It marked the weakest year-on-year quarterly gross domestic product growth since the first quarter of 2009 at the height of the global financial crisis.

“The trend of slowdown is strengthening despite Chinese authorities’ pledge to encourage domestic investment to support the economy. Domestic demand turned out weaker than unexpectedly solid exports,” said Kota Hirayama, senior emerging markets economist at SMBC Nikko Securities in Tokyo.

After another big decline in Chinese stocks on Thursday, policymakers launched a coordinated attempt to soothe markets, with central bank governor Yi Gang saying equity valuations were not in line with economic fundamentals.

Beijing has already been increasing policy support in the last few months to prop up growth.

Mr Yi and senior regulators pledged targeted measures to help ease firms’ financing problems and encourage commercial banks to boost lending to private firms. China’s Vice Premier Liu He, who oversees the economy and financial sector, also chimed in to bolster sentiment.

The Shanghai Composite index, which slumped more than 1 per cent in early Friday deals, rallied strongly in afternoon trading to finish up 2.6 per cent.

Third quarter growth was hurt by the weakest factory output since February 2016 in September as automobile makers cut production by over 10 per cent amid a sales slowdown.

“Weakness is largely coming from the secondary industry — most notably manufacturing. We may review our Q4 forecasts,” said Betty Wang, senior China economist at ANZ in Hong Kong.

On a quarterly basis, growth cooled to 1.6 per cent from a revised 1.7 per cent in the second quarter, meeting expectations.

Importantly, second-quarter sequential growth was revised down from the previously reported 1.8 per cent, suggesting the economy carried over less momentum into the second half than many analysts had expected.

Published in Dawn, October 20th, 2018