Fading momentum worldwide would add to bets that the world's
second-largest economy likely slowed in the third quarter as its
sagging housing market increasingly weighed on other sectors.
Retail sales likely grew at their slowest pace in about 3-1/2 years
in September, rising 11.7 percent from a year ago, a Reuters poll of
economists showed.
Fixed-asset investment, one of the two biggest drivers of the
economy alongside domestic consumption, is also expected to show
further signs of faltering, posting its worst performance in nearly
13 years.
Growth is seen at 16.2 percent between January and September
compared with the year-ago period, a level not seen since December
2001.
Reflecting softer domestic demand, imports probably fell 2.7 percent
in terms of value in September from a year earlier, the biggest drop
in six months. The weak figure could put additional downward
pressure on already sliding global commodity prices.
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"The Chinese economy probably continued its downward trend in the
third quarter," said Shen Minggao, an economist at Citi. "The
property drag reshaped the investment landscape, and its downside
has not been contained due to policy hesitation."
As a result of the broad slowdown, producer deflation was expected
to have persisted for the 31st consecutive month as producer prices
fell 1.5 percent.
Annual consumer inflation was also seen cooling to a two-year low of
1.7 percent in October.
The export sector is the only part of the economy expected to show
any signs of buoyancy. Export growth was seen quickening to 11.8
percent in September from a year ago, up from 9.4 percent in August.
Growth in factory output was also predicted to have picked up to 7.5
percent on an annual basis, but only because it had touched a
six-year low of 6.9 percent in August.
PROPERTY STILL WEAK
In a bid to stem the slide in the property market, China cut
mortgage rates for second-home buyers last week by giving them a 30
percent discount on loans. Downpayment levels were also lowered to
30 percent from 60-70 percent.
The move, which some economists have described as China's most
important policy change this year, was aimed at bolstering a housing
market that accounts for about 15 percent of China's economy and
affects 40 industries from steel to cement.
It was the first time China has cut mortgage rates since the 2008/09
global financial crisis.
Yet some analysts doubt the worst is over. A glut of unsold homes
should weigh on future property investment, they argued.
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"We expect property construction to slow further after the 'Golden
Season'", said Tao Wang, an economist at UBS in Hong Kong, referring
to the months of September and October, the usual peak season for
home sales.
"This, in turn, should impose an increasingly negative drag on
demand and production in other industries," she said.
Indeed, the impact from a flurry of stimulus measures unveiled
earlier in the year already seems to be waning.
Whether China decides to further loosen policy would depend on
whether its leaders are prepared to stomach slower economic growth -
and likely higher unemployment - in exchange for a model of economic
development that is less reliant on easy credit.
Despite public comments by senior Chinese leaders that China's
monetary policy has not been loosened this year to stoke economic
growth, data suggested otherwise.
The amount of new loans that were disbursed in the first eight
months of this year was up 5 percent compared with the same period
last year.
A central bank official was also quoted as saying in July that
Chinese banks are likely to extend 9.5 trillion yuan of new loans
this year in their strongest lending surge since the global
financial crisis.
Economists predicted that liquidity conditions were little changed
in September.
Growth in broad M2 money supply probably grew 12.9 percent, slightly
under a 13 percent annual target, while banks disbursed 735 billion
yuan ($119.9 billion) of new loans, up from 702.5 billion yuan last
month.
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Foreign exchange reserves were seen at $4.07 trillion at the end of
the third quarter, up from $3.99 trillion in the previous quarter.
(Reporting by Koh Gui Qing; Editing by Kim Coghill)
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