World Economy

China Economy Seems to Stabilize

China Economy Seems to StabilizeChina Economy Seems to Stabilize

A flurry of data from China in the coming weeks is expected to reinforce views that the world’s second-largest economy is stabilizing, despite stubbornly weak exports and worries that a property boom is peaking.

Signs of steady expansion would give room to policymakers to focus on reforms and risk control as China faces a growing debt pile and increasingly inefficient credit-fuelled growth, Reuters reported.

China has reported steady 6.7% economic growth for the last three quarters, and looks set to hit Beijing’s full-year target of 6.5 to 7%, fuelled by strong infrastructure spending, record bank lending and a red-hot property market.

However, unbalanced growth and debt risks have stoked internal debate over potentially lowering the target for 2017, especially as global demand remains weak and private firms have been reluctant to invest, leaving growth reliant on government spending and state-owned firms.

Vice finance minister Zhu Guangyao said this week that China’s debt is under control, but warned that challenges remain, while the IMF said in August that the country’s debt load is unsustainable.

Analysts are expecting new property curbs to have an impact on economic growth, but the impact may not show up in October.

“The new measures target property sales, so the impact on real estate investment will take time to show up,” said Bank of Communications economist Liu Xuezhi in Shanghai.

“We still forecast property investment grew in October with relatively strong growth in property-related consumption.”

Nomura economists said in a note this week that “a cooling property market should weigh on property investment and in turn, on the real economy, in the coming months. We maintain our real GDP growth forecast of 6.4% year-on-year in Q4”.

 Current A/C Surplus

China’s current account surplus accounted for 2.5% of GDP in the third quarter of 2016, remaining below “a reasonable level” of 4%, a statement from the foreign exchange regulator said Friday, Xinhua reported.

In the third quarter, the current account surplus rose 11% from the second quarter to $71.2 billion, according to preliminary data released by the State Administration of Foreign Exchange.

Goods trade surplus, major contributor to the current account surplus, rose 9% from the previous quarter to $137 billion due to slight recovery in overseas and domestic demand.

Deficit in service trade widened 25% to $69.5 billion in the same period, the statement said.

China’s current account has witnessed a surplus for 22 consecutive years, mainly due to strong exports in manufactured goods. The proportion of the surplus to China’s GDP reached a peak of 10% in 2007.

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