Instant View: China's third-quarter GDP grows 6.5 percent year-over-year, its slowest pace since 2009

BEIJING (Reuters) – China's economic growth in the third quarter has slowed at its weakest pace since the global financial crisis and has not met expectations, while a multi-year campaign for its Attacking the risks of debt and the trade war with the United States was beginning to be felt.

The economy recorded a 6.5% growth in the third quarter compared to the previous year, a slowdown compared to the second quarter, said Friday the National Bureau of Statistics. Analysts polled by Reuters forecast a 6.6% growth in the economy between July and September.

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KEY POINTS

* T3 GDP + 6.5% Y / Y (fcast +6.6 PCT, prev +6.7 PCT)

* Q3 of GDP +1.6 pct q / q (+1.6 pc of prev, +1.7 pct of prev)

* Industrial production in September + 5.8% y / y (live broadcast + 6.0%)

* Retail sales in September + 9.2% y / y (circulation + 9.0%)

* Investment in fixed assets from January to September + 5.4% annual average (+ 5.3% in early circulation)

* Seven real estate investment + 8.9% y / y vs + 9.2% in August – Reuters calculation

MARKET REACTION

Asian stock markets and China's shares fell after the data. The Australian dollar AUD = D4, considered a liquid indicator of Chinese demand, was stable.

COMMENT:

RYAN FELSMAN, MAJOR ECONOMIST, COMMONWEALTH BANK OF AUSTRALIA, SYDNEY

"What is remarkable is the fact that the overall GDP growth for the quarter of 6.5%, is in line with China's goal for the end of the year.

"The overall global figure will of course dominate the fact that it is the slowest since 2009, but it is a little mixed and the consumer side is a little more positive than expected.

"We were certain of a decline in net exports. Domestic demand and new export orders have therefore declined. This has been quite clearly indicated in the Purchasing Manager indexes we have seen. So it was not a big surprise. There has been some advance on exports ahead of tariffs.

"But the total impact of the tariffs will probably not be done until 2019."

SELENA LING, CHIEF RESEARCH AND CASH STRATEGY STRATEGY, OCBC BANK, SINGAPORE

"At the moment, the numbers suggest that IPL is always ahead of tariffs and that this is a continuous story. This does not show the full impact of the trade war.

"2019 will be the year when we will see the full weight of US fares, as they pass. According to our modeling, if tariffs on all of the $ 505 billion were to be adopted, the risk is that growth may fall below 6%. In the worst case, we are at 5.4% next year, which is a virgin territory for China.

"Basically, China uses many political tools and its decision-makers juggle a lot. Not only must they mitigate the slowdown in growth, but they must also try to stem the deterioration of the indoor climate. "

RAY ATTRILL, CHIEF STRATEGY FX, NAB, SYDNEY

"This is the proverbial backpack, with low industrial production but retail and investment forecasts that exceed expectations. This shows that China is pulling all the levers to support domestic demand in the face of this trade pressure. There is already a strong acceleration of outstanding loans and the PBOC is announcing new measures. In the end, China will take steps to protect its economy and show the United States: "Hey, we do not need you."

"As for the yuan, they have corrected it today because of the evolution of the dollar. Obviously, they do not want to abandon it. We suspect they will let it pass beyond 7 hours in the first half of next year, if only because rising credit spreads with the United States will lead to investment losses. "

TORU NISHIHAMA, ECONOMIST IN CHIEF, INSTITUTE FOR LIFE RESEARCH DAI-ICHI, TOKYO

"The slowdown trend is getting stronger despite the Chinese authorities' commitment to encourage domestic investment to support the economy. Domestic demand proved weak, while exports remained strong.

"Last-minute exports by foreign companies preparing for an increase in US tariffs have probably boosted exports. This rush to exports will likely diminish as the trade war with Washington intensifies.

"China's retaliatory tariffs on imports from the United States will also increase the cost of imports such as food grains, while oil imports will also increase, which will likely hurt consumer purchasing power." Chinese.

"In the future, the Chinese economy will avoid a difficult landing, because the authorities take measures such as monetary easing."

BETTY WANG, MAIN ECONOMIST OF CHINA, ANZ

"The figure of 6.5% is well below our consensus expectations. Much of the weakness comes from the secondary sector – especially manufacturing.

"We can review our forecast for the fourth quarter. Real estate investments continue to resist, which could provide some support. "

HO WOEI CHEN, ECONOMIST, UOB, SINGAPORE

"The impact on trade is not yet visible as trade figures for September continued to grow very strongly, driven by the rise in the exchange rate, the weakness of the Chinese currency and the strength of the US economy. In the future, we will not see much impact on trade as we expect IPL to continue in the coming months. But we could see an impact next year, when Chinese tariffs, worth $ 200 billion, go from 10% to 25%.

"The main impact on growth is a moderation of investment and private consumption. I think growth will continue to slow, we are at 6.4% in the fourth quarter. For the full year, it remains unchanged at 6.6% this year and 6.3% the following year. "

KOTA HIRAYAMA, MAJOR ECONOMIST OF EMERGING MARKETS, SMBC NIKKO SECURITIES, TOKYO

"Investment in fixed assets, especially public investment, was weak and weighed on industrial production, which weighed on GDP.

"We expect a downward trend in the Chinese economy, but it is likely to remain around 6.5 percent in October-December, thanks to government stimulus.

"Exports have not deteriorated yet, but China's trade is likely to shrink as a result of relations between China and the United States. commercial disputes. We expect a negative impact of the trade tension more clearly in the data after the start of the new year. "

NIE WEN, ANALYST, HWABAO TRUST, SHANGHAI

"GDP growth in the third quarter was 6.5%, which is still in line with market expectations. But overall, growth has slowed despite strong exports. Growth in investment and consumption has reached record levels.

"In the future, the economic outlook is not optimistic, with exports facing new hurdles as US tariffs come in and demand from emerging countries declines.

"GDP growth is expected to slow to 6.0 to 6.2% next year."

CONTEXT:

– The Chinese economy has slowed slightly compared to the second quarter, as expected, slowed by a repression that has lasted for years on riskier loans, which has led to higher corporate borrowing costs.

– At the beginning of the year, the threat of a trade war between Beijing and Washington has caused much uncertainty about growth prospects. Now, this threat has become a reality when the two largest economies in the world have imposed tariffs on their reciprocal products in recent months, which has made the issue of a dispute much to fear of getting a price heavy in terms of investment, trade and commerce. and growth.

– Beijing has stepped up its political support to offset increasingly unfavorable growth barriers by increasing the liquidity of the financial system by reducing the liquidity that banks must keep as reserves and by applying a policy of fiscal expansion. The People's Bank of China (PBOC) has reduced the reserve requirement ratio (RRR) of banks four times this year – the latest reduction taking effect on 15 October.

– Data from the last few months have shown weak domestic demand, with factory activity being less dynamic than infrastructure investment and consumer spending. The sharp decline in the Chinese stock market this year and continued pressure on the Chinese currency add to the challenge of policymakers seeking to maintain the economic equilibrium.

– While exports have held up well and unexpectedly accelerated in September, this force is largely attributable to companies shipping front-load cargoes to avoid higher duties in the United States. More timely surveys of the private and official manufacturers' purchasing index revealed a contraction in export orders.

– Analysts and government officials expect full year growth to easily reach China's official target of 6.5%. Friday's data suggests that the economy could miss this goal. The big challenge in Beijing is how to maintain the growth of global production against the protectionist policies of US President Donald Trump, "America Only".

(The story corrects the name of economist Dai-ichi Life)