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UPDATE 2-China's Q3 economic growth slows as expected, property measures bite
October 19, 2017 / 2:37 AM / a month ago

UPDATE 2-China's Q3 economic growth slows as expected, property measures bite

* China Q3 GDP growth at 6.8 pct, down from Q2

* Sept factory output growth 6.6 pct

* Sept retail sales grow 10.3 pct

* Jan-Sept fixed asset investment up 7.5 pct (Adds details, analysts comments)

By Kevin Yao and Elias Glenn

BEIJING, Oct 19 (Reuters) - China’s economic growth slowed slightly in the third quarter, as expected, as the government’s efforts to rein in property market and debt risks tempered activity in the world’s second-largest economy.

The economy grew 6.8 percent in the third quarter from a year earlier, in line with the median estimate in a Reuters poll and down from 6.9 percent in the second quarter, the National Bureau of Statistics said on Thursday.

In all, economic performance was solid and on track to comfortably beat the government’s target of around 6.5 percent for this year.

While the numbers met economist forecasts, they raise questions about more optimistic expectations flagged by the country’s central bank governor this week. People’s Bank of China governor Zhou Xiaochuan on Sunday said gross domestic product (GDP) could grow 7 percent in the second half of this year.

“The data show that some deleveraging is continuing and government reforms are working but growth is still being supported at a reasonable rate,” said Kaori Yamato, senior economist at the Mizuho Research Institute in Tokyo.

Analysts had penciled in a gradual GDP slowdown due to an expected softening in property investment and construction as more cities try to cool surging housing prices, while a government campaign against riskier lending pushes up borrowing costs.

In the property sector, growth in new construction slowed, while property sales dropped for the first time in more than two-and-half years in September.

“Unequivocally, the property boom has peaked,” said Rosealea Yao, a property analyst at Gavekal Dragonomics.

“We have seen some big rebounds at the end of the first and second quarter, but given how fast the sale numbers are declining, we expect no big rebound this time.”

China’s economy has surprised global financial markets and investors with robust growth so far this year, driven by a renaissance in long-ailing “smokestack” industries such as steel.

At the same time, there are concerns about the state’s growing role in the economy: the acceleration in year-on-year state investment growth outstripped private investment growth in September.

Analysts and global economic bodies such as the International Monetary Fund warn Beijing is still too reliant on debt-fuelled stimulus to meet fixed growth targets.

In the opening speech of a key, twice-a-decade Communist Party Congress this week, President Xi Jinping said China will deepen economic and financial reforms and further open its markets to foreign investors as it looks to move from high-speed to high-quality growth.

However, while expressing support for market reform and private firms, Xi also called for stronger, bigger state firms.

ROOM FOR REFORMS

While policymakers’ efforts to curb property market speculation and cut debt are hurting growth in some parts of the world’s second largest economy, activity has been supported by better-than-expected expansion in trade and bank lending.

Beijing has set a slightly more modest growth target of around 6.5 percent for 2017, theoretically offering more room for reforms after the economy grew 6.7 percent in 2016 - the weakest pace in 26 years.

GDP in the third quarter grew 1.7 percent quarter-on-quarter, compared with growth of 1.8 percent in April-June, which was revised up from initially reported 1.7 percent growth.

Analysts had expected third quarter GDP would grow 1.7 percent on a quarterly basis.

China’s factory output grew 6.6 percent in September from a year earlier, beating expectations, while fixed-asset investment expanded 7.5 percent in the first nine months of the year, missing forecasts.

Retail sales rose 10.3 percent in September from a year earlier, compared with analysts’ expectations for a 10.2 percent rise. Disposable income grew 7.5 percent in the first nine months of the year, the fastest rate in two years.

Data last week showed China’s import and export growth accelerated in September, suggesting the economy is still expanding at a healthy pace. China’s banks also extended more loans than expected last month, buoyed by demand from home buyers and companies.

Reporting by Elias Glenn and Kevin Yao; Editing by Sam Holmes

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