China’s economy expanded at a steady 6.7 percent in the third quarter and looks set to hit Beijing’s full-year target, fueled by stronger government spending, record bank lending and a red-hot property market that are adding to its growing pile of debt.
Wednesday’s data painted a picture of an economy that is slowly stabilizing but increasingly dependent on government spending and a housing boom for growth, as private investment and exports remain stubbornly weak.
Some economists believe Beijing has had to “double down” on stimulus this year to meet its official growth range of 6.5 to 7 percent, and say the government’s obsession with meeting hard targets may hurt both planned reforms and the long-term health of the world’s second-largest economy.
“So far this year they have clearly chosen to do everything they can to meet the growth targets, and now there is a little bit of an upward surprise from the housing market which actually will help them with GDP growth this year,” said Louis Kuijs, head Of Asia economics at Oxford Economics in Hong Kong.
“The question really is, is the leadership willing to move to somewhat lower growth targets in order to put growth on a more sustainable footing, or will it feel obliged to continue to hang on to those very high growth targets.”
The economy grew at the same clip in the third quarter year-on-year as in the first and second quarters, as analysts polled by Reuters had expected. Government infrastructure projects and the property boom have spurred prices and demand for raw materials and goods from cement and steel to furniture.
On a quarterly basis, it grew 1.8 percent, again in line with expectations but easing slightly from the previous period.
PROPERTY MARKET BIGGEST RISK FOR NOW
Economists believe the greatest near-term risk for China is a possible correction in the high-flying property market, which accounts for about 15 percent of GDP.
Real estate investment accelerated in September and home sales soared, highlighting persistent investor demand even as more cities tighten measures to curb prices.