Beijing: China’s economy moved up another gear last quarter in response to aggressive monetary and fiscal stimulus, making it all but certain that the government will hit its full-year growth target of 8%.
Gross domestic product grew 8.9% in the July-September quarter from a year earlier, compared with 7.9% in the second quarter and 6.1% in the first three months of the year, according to the median forecast of 18 economists polled by Reuters.
Other figures for September, due to be released alongside quarterly GDP on 22 October, are likely to show a further rebound in industrial output, buoyancy in retail sales and investment and a clear ebbing of deflationary pressure.
Morgan Stanley shares the most bullish forecast among those polled, pencilling in 9.5% GDP growth.
“For the third quarter as a whole, we witnessed a solid recovery in domestic private sector demand (consumption and investment), helping to offset the levelling-off of policy-driven capital expenditure and persistent weakness in exports,” they said in a note to clients.
Goldman Sachs is also forecasting 9.5% year-on-year growth, which it said implies a quarter-on-quarter slowdown to an annualised pace of around 14% from about 16.5% in the second quarter.
At the turn of the year, when the economy almost ground to a halt in the depth of the global downturn, Beijing’s totemic target of 8% full-year growth looked fanciful.
The economy has since pulled out of its swoon, but policymakers are still guarding against complacency and warning that the expansion is not yet on a solid footing.
Chief banking regulator Liu Mingkang became the latest senior official to rein in expectations, telling an audience in Hong Kong on Friday that it was too early to talk about withdrawing policy stimulus as the global crisis was not yet over.
But economists both inside and outside the government now firmly expect full-year growth of more than 8%.
The Chinese Academy of Social Sciences, the government’s premier think-tank, said in a forecast carried on Monday by the China Securities Journal that GDP would expand 8.3% this year and, barring natural disasters, growth cold hit 9% in 2010.
One concern among investors is that the authorities will clamp down too hard on new credit after a record lending spree in the first six months by China’s predominantly state-owned banks to complement Beijing’s 4 trillion yuan fiscal stimulus.
But economists at Bank of America Merrill Lynch said they saw no need to worry about liquidity for the real economy.
Even though headline loan growth was slowing, they estimated that 1.0 trillion yuan in discounted bill financing extended in the first six months would be converted into normal loans in the second half as the bills matured.
Citing positive momentum across most of the economy except for the export sector, the bank said it was sticking to its growth forecasts of 8.7% for all of 2009 and 9.2% for the third quarter.
“We expect China’s domestic economic recovery continued to solidify in September. Almost all major indicators will likely improve from August to September,” the bank said in a report.