As the National Statistics Office announced today, the Chinese economy grew by 9.1% on a year earlier in the third quarter of 2011 on the basis of provisional estimates, after an increase of 9.6% in the first half of the year. While private consumption looks to have been pretty stable judging by the retail sales figures, investment activity lost a touch more momentum..
Overall, the latest economic indicators point to a continuation of what is, by Chinese standards, fairly moderate growth. Although the purchasing managers’ index for the manufacturing sector rose slightly for the second month in a row, at 51.2 points it is still only marginally above the expansion threshold of 50 points. Real GDP growth in the fourth quarter is likely to be more or less on a par with third quarter growth. All told, therefore, we are sticking with our estimate that the Chinese economy will expand by 9.3% in real terms this year.
China: Soft landing increasingly likely
Even if we are thus expecting a soft landing, the risks to the Chinese economy going forward should not be underestimated. These risks are above all on the domestic front. Inflation still poses a considerable problem, even if September year-on-year inflation of 6.1% was no longer quite as high as in the preceding months. The situation in the Chinese banking sector also gives cause for concern. Following the sharp rise in lending seen in 2009 and 2010, there is a danger that non-performing loans will surge, not least against the current backdrop of slower growth. The share prices of the four largest state banks came under severe pressure in recent months despite record profits, prompting the state to support the stocks of these banks by buying up shares via the investment fund CIC.