China’s economy grew by 9.1% year-on-year in the third quarter, suggesting that policymakers are sustaining the flight path to a soft landing. Quarter-on-quarter GDP growth slowed from 2.4% to 2.3%, but was still faster than the 2.0% of the first quarter.
Not that the economy doesn’t remain vulnerable to external and internal shocks. Export demand from developed countries remains fragile. Europe’s eurocrisis and America’s political impasse, on top of the great consumer deleveraging occurring on both continents, continue to ensure slow to no growth in both markets. Beijing’s attempts to rebalance growth from investment and exports towards domestic consumption should make the economy better able to withstand an external demand shock. This Bystander doesn’t believe the substance yet matches the promise, however.
Meanwhile, the domestic property market and the closely linked quality of banks’ loan books since the stimulus that followed the 2008 global financial crisis remain concerns. Bankruptcies among small and medium-sized enterprises suggests that the tightening of monetary policy since 2010 has slowed growth overall, but unevenly. The sustained 9%+ GDP growth rate suggests that further tightening to tackle stubbornly high inflation remains a possibility, though policymakers may want to give themselves another quarter’s figures to be confident that a hard landing is not in prospect.