China's third-quarter GDP growth fastest this year, but outlook dim

Fri Oct 18, 2013 12:50pm EDT
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By Aileen Wang and Kevin Yao

BEIJING (Reuters) - China's economy grew at its quickest pace this year between July and September in a rebound fuelled largely by investment, although signs are already emerging that the pickup in activity may lose some vigor.

Gross domestic product in the world's second-biggest economy rose 7.8 percent from a year earlier, official data showed, marking only the second quarter in the last 10 in which growth has accelerated.

An unexpected fall in exports in September, and easing growth in factory output and retail sales suggested the economy was already slowing down at the end of the quarter.

Authorities are also expected to cool credit growth as inflation pushes to a seven-month high, another factor analysts say will drag on economic activity.

"The growth peak was behind us in the third quarter," said Ting Lu, an economist at Bank of America-Merrill Lynch. "We believe the People's Bank of China will slightly shift its monetary policy from a moderate expansion in the third quarter to a neutral stance."

After three decades of double-digit growth heavily reliant on exports and investment, China is trying to shift or "restructure" the economic mix so that activity is geared much more to consumption, as it is in more developed countries.

But the latest figures show investment accounted for over half of the expansion so far this year, underlining the challenge Beijing faces to restructure the economy, which it hopes will provide for more sustainable growth in the future.

Reducing reliance on China's traditional growth drivers is expected to crimp the economy, although sluggish global demand has provided an added drag.   Continued...

Workers set up scaffolding at a construction site in Huaibei, Anhui province, October 16, 2013. REUTERS/Stringer