7/31/2019 Macro Update: China growth close to hitting the low
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China: GDP growth decelerated in Q3 but is close tohitting the
low point
THURSDAY
OCTOBER 18, 2012
GDP grew by 7.4% year-on-year in the third quarter compared to
7.6% in Q2. (Chart1) Growth slowed for the seventh consecutive
quarter. We have cut our GDP forecastslightly to 7.7% in 2012. In
2013, GDP will increase by 8.0% and in 2014 by 8.2%.However, the
September data beat expectations and reinforced our long-held view
thatChina will avoid a hard landing. We expect GDP growth to
accelerate slightly in Q4.
The 18th National Communist Party Congress has been scheduled
for November 8. Alarge share of the top decision making body will
be replaced, Xi Jinping is expected tobecome General Secretary of
the Communist Party and President, while Li Keqiang willbecome
Premier. Uncertainty surrounding the leadership changeover and the
BoXilai scandal has muted the governments response to the economic
slowdown.
The Peoples Bank of China (PBoC) has held its key interest rate
at 6.0% percentsince the rate cut in early July. Instead, the
central bank is using reverse repurchaseagreements to inject
liquidity into the money market. We expect the PBoC to hold thekey
interest rate steady for the remainder of 2012.
Purchasing managers indices (PMIs) have stopped worsening but
are still belowthe 50 level. The official PMI improved somewhat to
49.8 in September. The arguably
more reliable Markit/HSBC PMI also improved slightly. (Chart 2)
Price pressures are weak. Headline inflation decelerated slightly
to 1.9% in September
while food inflation decelerated to 2.5%. Core inflation printed
at 1.7%. (Chart 3)Inflation is expected to increase moderatelyin
Q4.
Exports provided an upside surprise in September and increased
by 9.9% in year-on-year terms. Imports are still rising slowly,
however. (Chart 4)
Both industrial production and retail sales accelerated in
September. (Chart 5) New bank lending was weak in September at 623
bn yuan compared to more than
700 in August.However, weak bank lending was offset by growth in
other forms of creditand the money supply grew at the fastest rate
since June 2011. (Chart 6)
The housing market is still weak. Housing pricesare falling in
year-on-year terms butat a slower pace.(Chart 7) Of 70 cities
tracked, 31 saw price gains in September and 24saw falls. Real
estate transactions have recovered since the bottom in April.
(Chart 8)
The yuan (CNY) has started to appreciate against the USD again.
(Chart 9)
Andreas Johnson
SEB Economic Research
+46 8 763 80 32
[email protected]
Key data
Percentage change
2011 2012 2013 2014
GDP* 9.2 7.7 8.0 8.2
Inflation* 5.4 3.0 3.5 3.8
USD/CNY** 6.29 6.28 6.25 6.20
* Percentage change. ** End of period exchange rate.
Source: MacroBond, National Bureau of Statistics of China,
SEB.
