China's economic growth drops to 7.3% in 3Q, but analysts remain upbeat

CHINA'S economy grew at a faster-than-expected pace of 7.3 per cent in the third quarter, a reassuring sign of resilience in the world's second largest economy that immediately boosted Asian shares and dampened talk of any large stimulus measures to come by year-end. 

The growth data, released Tuesday morning  by the National Bureau of Statistics, was lower than second-quarter growth of 7.5 per cent and the lowest in almost six years.

But it was a stronger performance than analysts feared amidst what looks to be a rapid slowdown in China's over-heated property sector.

 "People were looking for more of a slowdown in the third quarter, and growth held up, so that allays fears," said ING Bank's Asia chief economist  Tim Condon. 

The resilient numbers bear out the Chinese central bank's strategy of targeted monetary measures to boost liquidity - such as the injection of funds into China's big banks through three-month loans.

It has stuck to discrete moves  like this in the last six months, eschewing a broad policy change like dropping  interest rates, despite mounting pressure as China's property sector rapidly cooled. 

Almost all Chinese cities have eased property buying restrictions and banks have been encouraged to expand mortgage loans among first-time buyers, policies which seem to have sufficed to stop a crash - for now. 

"The property sector will stabilise a bit as these policies will work for a few months," said Gavekal Dragonomics economist Chen Long.

"But it could be worse next year, and if growth in the first quarter next year drops to 7 per cent, we should expect a bigger monetary boost," he said.

Alongside the gross domestic product (GDP) report, latest numbers for factory output, fixed asset investment and retail sales were also released on Tuesday. 

Factory output rose 8 per cent in September from a year earlier, beating expectations  and improving significantly from August's six-year low of 6.9 per cent.

The rebound in factory output calmed fears and has quelled talks of any big stimulus package before year-end, said experts. 

Previously, analysts had speculated that a big state package might be needed to hit the central government's target of "around 7.5 per cent" growth for the year.

With the third quarter's 7.3 per cent figure, economists now forecast a year-end overall figure to be within one or two decimal points of the 7.5 per cent target. 

"They won't hit 7.5 exactly but they're not that concerned about it," said ING's Mr Condon.

"The authorities have been telling us all year that they feel that the economy is doing fine and it's not just growth they are looking at, but reform and a broader array of economic targets. Today's data will reinforce their confidence in that approach."

rchang@sph.com.sg