19th October 2015
Economic growth across China during the third quarter eased back to its slowest pace since the global financial crisis.
GDP expansion slowed to 6.9% during the July to end of September period, down from 7% year-on-year growth in both the first the second quarter of the year.
However according to Capital Economics this was slightly stronger than expected as both the Bloomberg median and the group’s own forecast were 6.8%.
The world’s second largest economy has been beleaguered by extreme bouts of stock market volatility. On 8 July the country’s benchmark Shanghai Composite index dropped as low as 8% prompting many to label the day Black Wednesday.
As the country has attempted to switch from an export-driven nation to a consumer and services-led one, economic data has continued to disappoint over recent months. Earlier in October manufacturing figures indicated that the sector continued to slow during the previous month.
Looking at the latest GDP numbers Capital Economics China economist Julian Evans-Pritchard believes they “need to be taken with a grain of salt” as official GDP growth appears to have become a poor gauge of the performance of China’s economy.
He said: “Flaws with how the GDP deflator is calculated, along with political pressure to meet growth targets that have become increasingly at risk, have meant that official growth rates have not slowed nearly as quickly as most third party measures of growth in recent years.
“Overall, today’s data suggest that while the official GDP figures continue to overstate the actual pace of growth in China by a significant margin, underlying conditions are subdued but stable. Looking ahead, our view continues to be that stronger fiscal spending and more rapid credit growth will limit the downside risks to growth over the coming quarters.”
Trevor Greetham, head of multi-asset, Royal London Asset Management added: “The big stock market slide this summer was caused by concerns that China’s surprise currency devaluation was a response to something nasty in the woodshed. Today’s numbers go some way to easing those concerns with GDP growth only a fraction of a percentage point below the government’s 7% target as the economy rebalances away from industrial activity and towards consumer spending.”