China’s economy expanded at a slower than estimated 4.6% during the third quarter of the year, below the government’s goal of “around 5%, but marginally better than analysts had forecast. Now this is the second successive quarter in which China’s growth has declined short of the target, setting alarm bells ringing on whether China would be able to meet its annual goal: deepening property market crisis, low consumer and business confidence, and entrenched structural issues among others.
Despite the overall slowdown, bright spots show up nonetheless. Retail sales and factory output increased more than analysts had forecast, and since the beginning of the year, the government has been promoting various stimuli that include interest rate cuts, support for the stock market, and plans to increase the bank’s lending facilities.
Economists remain divided on whether these measures will be enough to reverse the slowdown. In a report issued yesterday, Moody’s Analytics does seem upbeat about the economy potentially beating its target, but most believe this economy needs more drastic measures to rectify the underlying problems, such as a serious downturn in real estate and weak domestic demand.
The property market remains a significant drag to growth. New home prices are falling at their fastest pace nearly a decade. Many economists believe that the sector will be the biggest hurdle to a stronger recovery until prices stabilize and housing inventories decrease. On a broader note, the People’s Bank of China has been attempting to send signals to financial institutions to increase lending, but it remains to be seen whether such efforts will be enough to overcome the larger economic challenges.
