China's economy slows to 7.4% in Q3, below target

Posted at 10/18/12 10:55 AM

BEIJING - China's economy slowed for a seventh straight quarter in July-September, missing the government's target for the first time since the depths of the global financial crisis.

The National Bureau of Statistics said GDP grew 7.4 percent in the third quarter from a year earlier - in line with forecasts from economists polled by Reuters - the first miss of the official target since 6.5 percent growth in the first quarter of 2009.

"This is within expectations, the economy is showing signs of stabilising, that is good news," said Dong Tao, an economist at Credit Suisse in Hong Kong.

"We think that with rebounding property markets, stabilising export orders, resuming consumption, we probably have seen the bottom of the economy. The economy can bounce back quickly."

While GDP growth at 7.4 percent would be cause for joy in recession-stalked developed economies, it represents a sharp slowdown for China, where GDP grew 9.2 percent in 2011 and has averaged an annual rate near 10 percent for three decades.

The government targets growth of 7.5 percent for the full year - reduced in 2012 from the previous 8 percent target - and the consensus forecast of economists polled by Reuters is that it will deliver on it, with an expansion of 7.7 percent.

Indeed, Premier Wen Jiabao was quoted by local media as saying on Wednesday that the economic situation in the third quarter was relatively good, and the government was confident of achieving its goal.

But the remorseless slowdown has confounded forecasters repeatedly this year, with the initial consensus call for growth to bottom in the first quarter being persistently beaten back to its present position of a trough in the third quarter followed by a mild uptick in the fourth quarter.

Some analysts cite electricity usage growth running at roughly half the average rate of the last five years as a manifest sign of economic malaise.

Others disagree. They say there is clear evidence that the financial system's liquidity taps have been opened wide and that fine-tuning policies - Beijing's mantra for a year now - are gaining traction.

The fine tuning includes two interest rate cuts, three cuts to the proportion of deposits banks must keep as reserves - freeing an estimated 1.2 trillion yuan ($190 billion) for lending - and approvals in the last month for infrastructure projects worth about $157 billion, although Beijing has not said explicitly where the money to fund them is coming from.