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 The world's second-largest economy grew 6.9 percent between July
and September from a year ago, the National Bureau of Statistics
said, slightly better than forecasts of a 6.8 percent rise but down
from 7 percent in the previous three months.
That hardened expectations that China would avoid an abrupt fall-off
in growth, with analysts predicting a more gradual slide in activity
stretching into 2016.
"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.
POLICY SUPPORT
While Chinese officials put a brave face on China's economic woes,
describing the slowdown as being "reasonable", senior leaders have
occasionally voiced worries.
President Xi Jinping told Reuters in an interview over the weekend
that the government has concerns about the economy and was working
hard to address them.
Policymakers think they can stem a rapid rundown of the country's
foreign exchange reserves and ease pressure on the currency by
pump-priming the economy to meet this year's growth target of about
7 percent, sources involved in policy discussions say.
But key parts of the economy are still losing steam.
Factory output in September rose 5.7 percent from a year ago,
missing forecasts for a 6 percent rise, and fixed-asset investment
(FAI) climbed 10.3 percent in the first nine months, below estimates
of 10.8 percent.
September retail spending alone bucked the trend, growing at an
annual rate of 10.9 percent, slightly beating forecasts for 10.8
percent.
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"The overall downturn pressure on the Chinese economy is still
huge," said Zhou Hao, a senior economist at Commerzbank in
Singapore, who expects government will lower the annual growth
target in its next five-year plan at the end of this month.
The latest Reuters quarterly poll showed economists expect the
central bank will cut interest rates by another 25 basis points
(bps) and lower the amount banks must hold as reserves by 50 bps by
year-end.
The same poll predicted economic growth of 6.8 percent in the fourth
quarter, easing to 6.7 percent in the first of 2016.
China's consumer inflation cooled more than expected in September,
while producer prices extended their slide to a 43rd straight month,
highlighting the urgency for the central bank to tackle deflationary
pressures.
To shore up growth, the government has quickened spending on
infrastructure and eased curbs on the ailing property sector. The
latter have helped revive weak home sales and prices but have not
yet reversed a sharp decline in new construction.
Data released separately on Monday showed China's government
spending surged almost 27 percent in September from a year ago.
Some market watchers believe current growth is much weaker than
government figures, though officials deny allegations that the
numbers are inflated.
Despite weak exports and imports, factory overcapacity and a cooling
property market, Beijing reported annual economic growth of 7.0
percent in the first two quarters, in line with its full-year
target.
However, some economists think the statistics may be underestimating
strong consumption and service sector growth, putting too much
weight on the cyclical and structural weaknesses in manufacturing.
(Reporting by Kevin Yao; Additional reporting by Winni Zhou, Shao
Xiaoyi, Koh Gui Qing in BEIJING; Pete Sweeney in SHANGHAI and
Shanghai Newsroom; Editing by Will Waterman)
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