So China’s third-quarter GDP growth has been announced as 8.9%. We’ll put aside questions for now about whether that’s how much the economy really grew. What are economists saying about this number?
The consensus is that 8.9% falls more or less around what had been expected for the quarter. That US$1.2 trillion in new loans in the first nine months was clearly not all going into the stock market (if it had, the Capitalist Roader Fund might be doing a bit better).
Some specific comments from economists:
Alaistair Chan, associate economist at Moody’s Economy.com, was not alone in pointing out the continuing gloomy export picture:
"Exports remain the key weakness for the Chinese economy, and the accompanying statement by the National Bureau of Statistics notes that the situation there is still ‘severe.’ Chinese exporters have been able to compete effectively with other low-cost producers in the region, but they are taking greater market share in a shrinking market. For this reason, despite the economy seemingly on the road to recovery, the government will not be keen to move on the currency yet."
But CLSA China Macro Strategist Andy Rothman ("I was a bit over-optimistic this time, expecting 9%-plus GDP growth for 3Q09") notes that the weak export numbers at least perform the service of illustrating that China’s economy is not as export-dependent as many would think:
"The fact that China’s GDP grew by 7.7% in the first nine months of the year while exports were still extremely weak (the trade surplus was US$135.5 billion, down by US$45.5bn y/y) illustrates that the mainland economy is not export-led. Net exports delivered a -47% contribution to GDP growth in the first three quarters, while final consumption accounted for 52% of growth and investment 95%."
J.P. Morgan Chairman of China Equities Jing Ulrich also draws attention to the massive contribution of investment to GDP, and discusses what is likely to happen next:
"Having achieved the primary objective of stabilizing the domestic economy, authorities are increasingly turning their attention to improving the quality of growth… We hold the view that broad-based macroeconomic tightening is unlikely to materialize in the remainder of the year. Until greater inflationary pressure and a sustained recovery in exports become apparent, pro-growth economic policies are expected to remain in place. Messages from the authorities suggest that they are not planning to withdraw stimulus measures in the near-term, although the government is clearly fine-tuning policies for sectors that are prone to overcapacity."
Many observers have said this year that Beijing’s stimulus represents something of a detour (if a necessary one) from the project of putting China on a path to more sustainable growth. Getting back on that path won’t be easy, but we’re moving in the right direction.