Services underpin China’s growth, but forecast is lower, with industry continuing to soften

• China’s latest national accounts data showed a slowing trend for China’s economy in the September quarter – with gross domestic product rising by 6.9% yoy – falling below the annual growth target for the first time this year. Reaching China’s annual growth target appears more challenging following the latest data release. As a result, we are revising our forecasts for China’s growth – to 6.9% for 2015 (7.1% previously) and 6.7%for 2016 (6.9% previously).

• Weakness in the industrial sector remains evident – China’s industrial production growth slowed to 5.7% yoy (from 6.1% in August), while fixed asset investment slowed to 6.8% yoy (from 9.2% previously) – the lowest rate of growth since December 2002.Slowing investment in the real estate and manufacturing sectors has been the key driver of this trend.

• Services remain the main engine for growth, and real retail sales growth accelerated –at 10.8% yoy (compared with 10.3% previously), around trend levels over the past few years.

• China’s trade surplus edged marginally wider in September – with weaker imports (in year-on-year terms) raising concerns around the health of the broader Chinese economy. These concerns are somewhat overblown, given the impact of falling commodity prices on import values.

• China’s new credit expanded in September – totalling RMB 1.3 trillion (compared with RMB 1.1 trillion in August) – almost 14.5% higher in year-on-year terms. Recent month shave seen an expansion in overall credit, in stark contrast to the declines across the first half of the year.

For more details, please see attached document

China economy at a glance  – October  (PDF, 757KB)