Stockholm (Ekonamik) – The Chinese economy grew by 6% during the third quarter of 2019, according to the country’s national statistical office. This is the first time since the first quarter of 1992 that China’s annual growth has fallen to this level. In the first and second quarters of 2019, GDP grew at 6.4% and 6.2%, respectively.
The new data was significant, even if not entirely unsurprising. Last week’s surprisingly upbeat Caixin PMI data release had raised some hopes that the decline in Chinese growth might decline, but to no avail.
Momentum or Front-Loading in September?
One of the issues underlying the relatively slower pace of Chinese growth is industrial production. Although it grew by 0.72 % in September this followed some of the sluggiest performance in the last 12 months in July (0.2%) and August (0.34%).
“The slight improvement in the September data could indicate that momentum is upward,” commented Bjarke Roed-Frederiksen, Senior Economist Latin America and China at Handelsbanken Capital Markets.
“September staged a late rally with industrial production rebounding from 4.4% year-on-year growth to 5.8%, while in real terms we also saw an improvement in fixed-asset investment and retail sales,” said Craig Botham, Senior Emerging Markets Economist at Schroders. However, he went on to caution that there’s “a risk that some of the strength in September was merely frontloading activity displaced from October thanks to the week-long holiday.”
Below 6% Growth in 2020
“We still see growth slowing amid persistent trade turmoil and expect that further stimulus will be of measured magnitude only,” cautioned Roed-Frederiksen. He also added that the effectiveness of any fiscal stimulus would potentially be achieved at the expense of “the huge effort from the authorities to dampen credit growth and secure financial stability.”
“The Q3 outcome is in line with our forecast and growth for 2019 as a whole is, in our view, still set to decline from last year’s 6.6% to 6.1% this year and 5.7% in 2020,” Handelsbanken’s Roed-Frederiksen noted. “For the first time, we also think there is a chance China could print sub 6% in its official data next year. Even then, however, we believe the GDP data will continue to understate the weakness in the Chinese economy,” Schroders’ Botham concluded.