Coverage: China’s economy grows just 6.9 percent

China announced its economy grew 6.9 percent in its third quarter, dipping below 7 percent for the first time since 2009. The release brings with it more concerns about the world’s economic outlook, since China is often considered a world leader in economic growth.

Mark Magnier of The Wall Street Journal had the day’s news:

China’s once-world-beating economy sputtered further in the third quarter, decelerating to its slowest pace since the global financial crisis and adding to concerns about the world economic outlook.

The 6.9% growth rate for the third quarter—dipping below 7% for the first time since 2009—clouds China’s prospects for reaching the official targeted growth rate of about 7% for the year. It also renews pressure on Beijing to enact more pro-growth measures.

“Overall it’s pretty disappointing,” said Société Générale CIB economist Klaus Baader, who expects fourth-quarter growth of 6.8%. “Investment continued to slow pretty sharply despite efforts by the government to support the economy. It doesn’t seem to be sufficient.”

The better-than-expected result—a Wall Street Journal survey of 13 economists forecast a median 6.8% gain—is likely to renew debate over the accuracy of China’s growth statistics. Other economic data released on Monday showed disappointing results in investment and industrial production. Earlier this month, China pledged to start following a stricter global standard in calculating its data.

Even in slowdown, China continues to grow at a pace that other major economies envy. China’s economy is nearly twice the size it was just six years ago, meaning at lower growth rates it remains a major engine for global consumption and production.

Neil Gough of The New York Times explained the economic trouble China has been facing in recent months:

Uncertainties over China’s decelerating growth have shaken global stock markets in recent months as investors have raised doubts about the quality of Chinese economic data and the transparency of the country’s policy decision-making process. Concerns have been heightened by China’s botched attempt to prop up its stock markets in July and the surprise move in August to devalue its currency, the renminbi, by the most in nearly two decades.

In addition to prompting increased volatility on stock markets around the world, questions over China’s development have affected global monetary policy. Janet L. Yellen, the chairwoman of the United States Federal Reserve, cited uncertainty over China as a reason for delaying raising interest rates after the Fed’s meeting last month.

China is struggling with an industrial slump that in recent months has appeared to be worse than the country’s leaders had anticipated. The country’s traditional growth drivers — manufacturing and housing construction — have recently become among the biggest drags on its economy, the world’s second largest after the United States.

Data released Monday showed continued pressure, with industrial production rising 5.7 percent in September, near its slowest pace since the financial crisis. Overall investment rose 10.3 percent in the first nine months of the year, its slowest rate of increase in 15 years.

BBC News reported government officials were comfortable with the growth as the country’s economy continues to upgrade:

China has been attempting to shift from an export-led economy to a consumer and services-led one.

Beijing set an official growth target of “about 7%” for the overall year but Premier Li Keqiang said a lower growth rate was also acceptable, as long as enough new jobs were created.

“In order to restructure, the economy will face some downward pressure,” Sheng Laiyun, a spokesman for the Chinese statistics agency, told reporters.

But despite a slowdown in the industrial sector, Mr Sheng said the services sector is expected to grow rapidly.

“All this indicates the restructuring and upgrading of the Chinese economy are going steadily.”

However, analysts say the steep fall in imports suggests domestic demand is not as strong as the government would have hoped.

Kevin Yao of Reuters explained how this quarter is the weakest growth China has experienced since 2009:

“Underlying conditions are subdued but stable,” said Julian Evans-Pritchard, an analyst at Capital Economics in Singapore. “Stronger fiscal spending and more rapid credit growth will limit the downside risks to growth over the coming quarters.”

Chinese leaders have been trying to reassure jittery global markets for months that the economy is under control after a shock devaluation of the yuan CNY=CFXS and a summer stock market plunge fanned fears of a hard landing.

Some analysts were hopeful that the third-quarter cooldown could mark the low point for 2015 as a burst of stimulus measures rolled out by Beijing comes into force in coming months, but muted monthly data for September kept such optimism in check.

“As growth slows and risk of deflation heightens, we reiterate that China needs to cut reserve requirement ratio (RRR) by another 50bps in Q4,” economists at ANZ Bank said in a note to clients.

“Looming deflation risk suggests that the People’s Bank of China will also adjust the benchmark interest rates, especially lending rate, down further.”

In its battle against China’s worst economic cooldown in more than six years, the central bank has cut interest rates five times since November and reduced banks’ reserve requirement ratios three times this year.

Despite the spate of easing, Monday’s GDP reading was still the worst since the first quarter of 2009, when growth tumbled to 6.2 percent.