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Fast Comment ChinaGrowth was still strong in Q3

  1. GDP growth fell only marginally to 6.8 percent in Q3
  2. Monthly indicators improved in September
GDP growth fell only marginally to 6.8 percent in Q3
Overall economic growth stayed fairly strong as GDP growth only fell marginally from 6.9 percent y-o-y in Q2 to 6.8 percent in Q3, in line with the consensus view. The stable development is well in line with our perception, but even if the economy had slowed more dramatically, it would likely not have been reflected in the official GDP data published on the second day of the twice-a-decade communist party congress. Following Xi Jinping’s increased focus on higher quality of growth instead of high growth in itself mentioned in his opening speech yesterday, a more pronounced decline in growth could be tolerated going forward. We continue to expect growth to slow gradually but steadily ahead, as the authorities’ efforts to dampen credit growth and the lively housing markets hit overall activity.
Monthly indicators improved in September
However, the monthly momentum was strong in September with growth of all three monthly activity indicators actually picking up. Retail sales growth increased more than expected from 10.1 percent y-o-y in August to 10.3 percent in September. Expectations were likely dampened by the fact that the mid-autumn holidays (or Golden Week) had moved from September last year to October this year. As the Golden Week usually buoys retail sales, this should have lowered the annual growth rate in September. The changed timing of the holidays on the other hand supports annual growth of industrial production as factories were closed in September last year but not this year. This likely explains some of the increase in industrial production growth from 6.0 percent to 6.6 percent, but also this outcome was stronger than expected. Finally, fixed investment growth (year-to-date) disappointed by falling more than expected, but our calculations show that it still corresponds to an increase in the ordinary annual growth rate from 3.8 percent y-o-y to 6.2 percent. The improved growth of fixed investments was primarily driven by a rebound in infrastructure investment projects following a drop last month. But also property investments improved.



Bjarke Roed-Frederiksen

Senior Economist

Latin America and China

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