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China’s economy lost further momentum heading into the fourth quarter as a cooling property market weighed on activity and export demand softened, surveys showed on Monday, putting Beijing’s official target for the year at even greater risk.
Analysts had already expected full-year growth to miss the goal of around 7.5 per cent, but many thought there may be some signs of stabilisation in the world’s second-largest economy late in the year after a flurry of stimulus measures.
Instead, the surveys showed demand at home and abroad continued to cool and the labour market remained under stress, while adding to fears that many companies are being starved of credit as banks grow more reluctant to lend. And measures announced in late September to shore up the slumping housing market so far seem to be having little effect, reinforcing expectations that Beijing will have to stump up more support.
“Growth momentum is slowing going into the fourth quarter,” said Kevin Lai, senior economist at Daiwa Capital Markets in Hong Kong.
“Exports were quite strong the last couple of months but that was mostly driven by electronics demand. So the orders for iPhones etc. have cooled down again. Europe and Japan are still struggling, so that is not good news.”
Growth in China’s services sector slipped to a nine-month low of 53.8 in October, the weakest reading since January, from September’s 54.0, the National Bureau of Statistics said.
It was still comfortably above the 50-point mark that separates growth from contraction, but readings on areas such as real estate and employment continued to shrink.
Home prices in China dropped for a sixth consecutive month in October, a separate private survey showed on Friday, pointing to a persistent downturn, despite government efforts to lift the market.
Beijing is counting on strong job growth in the services sector to offset that weakness, and top policymakers have insisted that the labour market remains resilient.
Another official survey on Saturday showed factory activity unexpectedly fell to a five-month low in October as firms fought slowing orders and rising borrowing costs.
A private factory survey by HSBC/Markit on Monday showed a similar worrying trend. Though overall growth picked up slightly, growth in new orders and new export orders - proxies for domestic and foreign demand - fell to their lowest in four to five months.
Exports have been one of the lone bright spots for the economy, and helped offset weaker internal demand in the third quarter.
Tommy Xie, an economist at OCBC Bank, estimated that without firmer exports, the economy would only grow an annual 6.7 per cent in the first three quarters this year — the slowest since the 1998 Asian crisis.
