China's economic growth falls to six-year low as rebalancing takes hold

Trading News

John

by John

Mon 19th Oct '15

China has slowed to its lowest rate of growth since the depths of the financial crisis, as the country rebalances from a manufacturing to service-driven economy.

Economic output rose by 6.9pc in the third quarter, according to the country's National Bureau for Statistics, higher than the 6.8pc forecast by economists, but the lowest pace of expansion since early 2009.

• The truth behind China's manipulated economic numbers

The GDP numbers - which are widely thought to over-estimate the "true" rate of growth - are a key policy target for the Chinese Communist party which is aiming for an expansion of "around 7pc" this year.

A statistical breakdown of the figures showed encouraging signs that the nascent services sector is beginning to make up a bigger share of growth.

Services grew at 8.4pc in the third quarter, while consumer spending remained robust after a 10.9pc uplift in retail sales. This was offset by continued decline in the dominant manufacturing sector, where industrial output fell to 5.7pc, from 6.1pc in September - it's lowest level since 2008.

"All this indicates the restructuring and upgrading of the Chinese economy are going steadily," said Sheng Laiyun, a spokesman for the Chinese statistics agency.

"The general condition of the Chinese economy remains strong."

The health of the world's second largest economy has become one of the biggest drivers of global financial sentiment. Shares in the Shanghai Composite rose 0.5pc after the release.

Chinese authorities are encouraging spending as a new driver for growth  Photo: Capital Economics

"Unfortunately, these figures need to be taken with a grain of salt as official GDP growth appears to have become a poor gauge of the performance of China’s economy", said Julian Evans-Pritchard at Capital Economics.

He added that the economic conditions remained "subdued but stable" and would likely see the government forced into greater fiscal expansion and interest rate cuts to prop up growth.

Chinese premier Xi Jinping is likely to reassure critics that the economic slowdown is being managed by authorities when he arrives in the UK on an official state visit this week.

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