Chinese Economy Likely To Slow Only Slightly In Third Quarter

Oct. 17, 2006
Growth is expected to ease to 10.5% from 11.3% in the second quarter.

With government efforts to tighten credit and cool investment likely to have only a limited impact, China's economy is expected to slow marginally in the third quarter, analysts said Oct. 17. China's economy grew a breakneck 11.3% in the second quarter and 10.9% for the first six months, prompting regulators to hit the economic brakes again with measures that included another interest rate hike.

Economists forecast gross domestic product (GDP) growth in the world's fourth largest economy to ease to about 10.5% in the three months to September on the back of lower domestic investment.

Slowing industrial output, down from 19.5% growth year-on-year in June to 15.7% in August, point to China's juggernaut economy starting to moderate slightly. Investment in new industrial plant, roads and other fixed assets rose 21.5% in August from a year earlier, a marked deceleration from 27.4% in July and 33.5% in June.

Frenetic investment and overproduction has long been the main concern of the government, worried that overheating could emerge in crucial sectors such as auto, mining, cement and real estate.

Economists also continue to worry that the Chinese economy remains wildly unbalanced, with consumption making up only about 14% as consumers continue to horde cash in banks instead of spend, leaving exports to continue in the lead. The trade surplus reached a record $110 billion for the first nine months of the year, already well above 2005's figure. Although China's trade surplus dropped in September compared with August, exports were still up 30.6% year-on-year at $91.6 billion, keeping the economy firmly on track for another record year.

Copyright Agence France-Presse, 2006

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