Brief China Economic Update – 18 October 2013

According to National Accounts data released today, the Chinese economy grew 2.2% in the September quarter to be 7.8% larger than the same period last year. The improvement in growth from last quarter was slightly above our expectation.

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According to National Accounts data released today, the Chinese economy grew 2.2% in the September quarter to be 7.8% larger than the same period last year. The improvement in growth from last quarter was slightly above our expectation, but is consistent with partial indicators during the quarter. The Chinese economy has been gaining support from improvements in external demand – although export data for the month of September softened significantly – as well as stimulus measures intended to ensure that annual growth targets are achieved. Rapid credit growth earlier in the year may also be working to economic activity, but borrowing costs have now lifted noticeably.

In contrast to rebalancing objectives, official data show that growth over the year-to-date in Q3 2013 was driven by investment (contributing 4.3ppts to growth), followed by consumption (3.5 ppts). This reflects the leaderships renewed emphasis on infrastructure spending to stimulate growth for this year. Net exports made a minor contraction, reflecting the smaller trade surplus. Revised q-o-q growth rates suggest the economy’s growth momentum has picked up over the past two quarters, suggesting stimulus measures have been successful in helping achieve the growth target for this year (7.5%). Annualised growth for Q3 was 9.1%, well above the 7.5% rate of growth in H1 y-o-y.

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