China Third-Quarter GDP Rises 6.8% From a Year Earlier -- 2nd Update
19 October 2017 - 2:03PM
Dow Jones News
By Lingling Wei
BEIJING--China's economy expanded at a robust 6.8% pace in the
third quarter, meeting market expectations, as traditional growth
drivers such as manufacturing and exports gained steam.
The strong showing is welcome news for Communist Party leaders
gathering for a twice-a-decade conclave in Beijing. To prepare for
the event, which is expected to strengthen President Xi Jinping's
reign over the nation for years to come, various levels of
government have for months mounted massive efforts to keep the
world's second-largest economy on an even keel.
The third-quarter pace slowed from 6.9% in the second quarter,
though it puts the full-year target set by the leadership for
growth of about 6.5% well within reach. Adding to a sense of
optimism in official circles, China's central-bank Gov. Zhou
Xiaochuan said just days ahead of the political conclave that
second-half growth could reach 7%.
Increased industrial activity and higher commodity prices were
major reasons behind the strong growth. The latter, partly a result
of policies to cut overcapacity, benefited state-owned
manufacturers in particular. That is because the capacity cuts led
to the closures of many private firms, especially in industries
like coal and metals.
Recovering global demand also helped, giving China some economic
breathing room, which has meant an economic slowdown that many
expected hasn't materialized.
Industrial production, a main gauge of manufacturing activity,
rose 6.6% in September from a year earlier, according to data
released Thursday by the National Bureau of Statistics. Retail
sales jumped 10.3%, though the pace of growth slowed from the first
half of the year, indicating consumers have grown wary of opening
their wallets.
Analysts say increased output was largely driven by state firms
that have seen a sharp rebound in profits this year. In the first
nine months of 2017, according to official data, large state firms
controlled by the central government--which dominate China's
smokestack industries--saw their profits jump 18.4% from a year
earlier to 1.1 trillion yuan ($167 billion).
Still-solid property investment, despite government efforts to
cool the housing market, has also increased demand for steel,
furniture and other materials, helping to lift profits in the
manufacturing sector. Meanwhile, a global economic recovery has
helped Chinese exporters.
This doesn't mean China has entered a new cycle of accelerating
growth, economists warn. To keep near-term growth steady, Beijing
has delayed fixing some of its long-running problems, such as
industrial overcapacity and excessive debt. That, in turn,
economists say, means risks for a prolonged slowdown in the economy
are rising, not declining.
In a speech Thursday that marked the opening of the party
congress, Mr. Xi laid out a sweeping plan to transform China into a
strong global power that stresses expanding the party's control
over the economy and all other corners of the nation. But unlike
his predecessor, who said China's national income would double over
a decade, Mr. Xi outlined his vision without specifying a broad
target for economic expansion, even as he reaffirmed Beijing's
commitment to development.
The omission indicated "a subtle de-emphasizing of specific
growth targets," said UBS China economist Wang Tao. Ms. Wang
projects that the government will soften its growth target slightly
for next year.
But to tackle the economy's long-term ills, some analysts say,
Beijing may need to significantly lower its annual growth targets.
So far, there have been few signs that the government is willing to
accept the trade-off.
A recent survey by China Beige Book, a data provider that tracks
China's economy, of more than 3,000 Chinese companies shows that
from July through September, hundreds of coal, steel, aluminum and
copper companies reported a sixth straight quarter of overall
capacity rising, not falling. Meanwhile, after a brief slowdown in
credit growth, Chinese banks handed out more loans last month,
indicating Beijing's preference for near-term stability over any
drop in economic activity.
"This will not persist," said Yukon Huang, a former country
director at the World Bank in China, referring to the near-term
recovery of China's economy.
"Long-term growth depends on more fundamental drivers such as
productivity growth," said Mr. Huang, who is now a senior fellow at
the Carnegie Endowment for International Peace. "That hasn't
happened yet."
Write to Lingling Wei at lingling.wei@wsj.com
(END) Dow Jones Newswires
October 18, 2017 22:48 ET (02:48 GMT)
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