China's economic growth rebounds to 7.8%

 

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The Independent Online

China's economic growth rebounded in the latest quarter, easing pressure on communist leaders for more stimulus and allowing them to focus on longer-term reforms.

The world's second-largest economy grew by 7.8 per cent over a year earlier in the three months ending in September, boosted by higher government spending, data showed Friday. That was up from a two-decade low of 7.5 per cent the previous quarter.

"The fundamentals of China's economy are turning for the better," said a National Bureau of Statistics spokesman, Sheng Laiyun, at a news conference.

The improvement eases pressure on communist leaders who say their priority is longer-term reforms aimed at steering the economy to slower, more sustainable growth based on domestic consumption instead of exports and investment.

The abrupt drop in global demand for Chinese goods prompted them to backtrack temporarily and launch a mini-stimulus of higher spending on railway construction and other public works to prop up growth and avoid politically dangerous job losses.

Communist leaders are due to meet in November to craft an economic development blueprint that reform advocates hope will include market-opening and more financial support to private entrepreneurs.

The country's top economic official, Premier Li Keqiang, said earlier Beijing would try to keep growth above 7.5 per cent. That is far above levels forecast for the United States, Europe and Japan but barely half of 2009's 14.2 per cent growth.

Asian stock markets were boosted by the Chinese growth figure but analysts have warned the rebound might not last because growth depends on government spending. Global demand is weak and Chinese consumer spending is growing more slowly than Beijing wants.

"China's economy rebounded in the third quarter because of the government's stimulus measures," said Moody's Analytics economic Alaistair Chan in a report.

The deceleration of China's economy is denting revenues for suppliers of commodities and industrial components such as Australia, Brazil and Southeast Asia. Lower Chinese demand already has depressed prices for iron ore and other raw materials.

Friday's data highlighted the economy's heavy reliance on government-led investment and the weakness of trade.

Spending on factories and other fixed assets contributed 55.8 per cent of the latest quarter's growth, or 4.3 percentage points of the 7.8 percent expansion, according to Sheng. Domestic consumption was 45.9 per cent of growth, or 3.7 percentage points of the total.

Trade was so weak that its contribution to overall growth was negative, according to Sheng, and detracted 0.1 percentage point from the quarter's growth rate.

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