China: GDP Growth Increases

October 18th, 2013
in econ_news, syndication

Econintersect: The third quarter GDP report from China shows an increase to a breakingnews130px7.8% year-over-year rate. The second quarter was 7.5%. The 3Q reading was also higher than the first quarter growth of 7.7%. The sustainability of the growth rate above 7.5% is being questioned though. Data in recent days has shown slowing of growth in industrial production, retail sales and investment for the month of September. However, the data for the first three quarters seems to assure that China will meet its official target of producing growth for the year of at least 7.5%.


Follow up:

This was only the third quarter in the last 14 that saw an increase in y-o-y GDP growth. That is seen in the following graph from Trading Economics (the 3Q 2013 data has not yet been added):


CNN Money mentions a number of economic concerns for China:

  • Mushrooming private credit;
  • Rapidly growing shadow banking system lending to small and medium sized businesses outside of government control;
  • Uncontrolled securitization processes that dilute lenders' risk but spread it throughout the economy;
  • Ballooning local government debt.

CNN says that a government audit is trying to"get a handle" on the debt problem. This may be released before the next Communist Party meeting next month. Changes in economic policies could result, slowing Chinese growth.

GEI contributor Michael Pettis has been insisting for the last 3-4 years that China must slow its growth to 3% a year or less as it rebalances from a high investment and export driven economy to one with higher levels of domestic consumption.


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