China GDP growth report eases fears

Added 19th October 2016

China has reported annualised gross domestic product growth of 6.7% for the third quarter, in line with market expectations and the government’s own forecasts.

China GDP growth report eases fears

Economists have offered mixed reactions, with some relief that there are no major alarm bells to be found in the latest pronouncements from Beijing evident. There is also some sentiment indicating the matching of the government’s own forecast in the short term appears a little too convenient however.

Erik Lueth, emerging market economist at Legal & General Investment Management, said the data points to an economy ‘in cruising speed.’

“This is based on significant stimulus and comes at the risk of financial crisis and/or Japanese-style stagnation over the medium. Q3 GDP grew at 6.7%, in line with the previous two quarters and expectations, said Lueth.  “Nominal GDP surged to 9% as deflationary pressures are abating. The latter is particularly apparent in the industrial sector, which is rebounding on the back of a buoyant property market. Momentum remained strong in September, with property sales up 35% year-on-year and investment in recovery mode.”

“Risks of a painful property bust are limited at this stage,” Leuth continued. “Price declines would have little impact on consumption as household debt, while rising, is still moderate. The main conduit of a possible property bust, construction activity, is still quite lacklustre at this point in the cycle.  Similarly, we don’t see risks of a financial crisis anytime soon.”

“A breakdown of the data reveals an acceleration in primary industry and a smaller increase in the tertiary, or services, sector,” noted Craig Botham, emerging markets economist at Schroders. “Manufacturing managed stable growth. Overall, this is not a promising sign for the rebalancing story, and suggests growth is being maintained at the cost of longer term sustainability. A look at the higher frequency data helps to illustrate this point. Over the quarter, credit growth barely slowed despite a dip in corporate lending, as mortgages and government municipal bond issuance helped to fill the void,” Botham added.

Meanwhile Bank of America Merrill Lynch has upgraded its forecasts for China as a result of this latest release. The bank’s research unit has bumped its growth prediction to 6.7% for this year and 6.6% for 2017, up from previous forecasts of 6.4% and 6.5% respectively.

Kames Income Hub


Vincent McEntegart, manager of the Kames Diversified Monthly Income Fund, explains how he aims to deliver a stable and sustainable income of 5% p.a.*, paid monthly, by investing in a range of asset classes

Square Mile Research

Matthews Asia Funds Asia Dividend
Matthews Asia Funds Asia Dividend...

Talking Factsheets is a video service for users...

Visitor's Comments Add your comment

Add Your Comment

We won't publish your address

About Author

Alex Sebastian

News editor

Alex joined Portfolio Adviser in April 2014 and has been a financial journalist since 2008. He has previously held editorial positions at the Financial Times Group and Euromoney Institutional Investor. Alex is NCTJ qualified and has a degree in economics from the University of Sussex.



Investment Strategy




PA Channel Island 2016
PA Channel Island 2016

8th November 2016
The Royal Yacht, Jersey


17th November 2016
The Andaz

PA Emerging Markets 2016
PA Emerging Markets 2016

1st December 2016
The Mayfair, London

Sponsored Content

Investment Strategy