Beijing: China’s economy grew 9.1% in the third quarter from a year earlier, the slowest pace since 2009, driving stocks lower on concerns that Europe’s debt crisis is dragging on the global recovery.
The gain was less than the median estimate of 9.3% in a Bloomberg survey of 22 economists and followed a 9.5% increase in the previous three months. The statistics bureau released the data in Beijing on Tuesday.
Asia’s benchmark stock index sank after China’s growth was limited by tighter credit and weaker demand from Europe, where Germany on Monday rejected speculation that any immediate resolution of the region’s crisis is possible. A slowdown in the pace of China’s expansion, which remains five times that of the US, may help Premier Wen Jiabao to tame inflation that is above the government’s target.
Chugging along: A file photo of a power station in Datong, Shanxi Province, China. Industrial production increased 13.8% in September from a year earlier. Bloomberg
“The latest developments in the euro zone have unnerved investors and many are fearful we’re going to see a repeat of the slump we saw at the end of 2008,” said Tim Condon, Singapore-based head of Asian research at ING Groep NV and a former World Bank economist. “A hard landing for China would require a bigger shock to growth than is likely.”
The Shanghai Composite Index closed 2.3% lower on Tuesday, the biggest loss in almost a month. The MSCI Asia Pacific Index fell as much as 2.7%. The yuan weakened 0.2% to 6.3813 per dollar.
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Industrial production increased 13.8% in September from a year earlier, the statistics bureau said. That compared with the 13.4% median estimate in a Bloomberg survey and a gain of 13.5% the previous month.
Concerns about China’s economy are focused on bad debt risks for banks, funding for small businesses, and the ability of local governments to repay money borrowed for infrastructure projects.
China Business News on Tuesday reported that rail projects have been halted due to cash shortages and the People’s Daily reported that some road-building stalled for the same reason.
“The risk of a hard landing is a distant scenario,” said Liu Li-Gang, an economist at Australia and New Zealand Banking Group Ltd in Hong Kong.
HSBC Holdings Plc and Bank of America Merrill Lynch echoed that view. Barclays Capital said the nation’s full-year expansion should be about 9%, with growth to slow to below 8.5% this quarter.
“Any outright easing of monetary policy will have to wait until inflation expectations stabilize and external demand falls sharply,” said Liu, adding that partial easing could include reducing reserve requirements for small- and medium-size banks.
Fixed asset investment excluding rural households climbed 24.9% in the first nine months, compared with the 24.8% estimated by economists and a 25% gain through August. Property investment for the January-September period rose 32%, from 33.2% through August.
Retail sales expanded 17.7% after a 17% increase in August.
Companies, including BASF SE, the world’s largest chemicals firm, are expanding in China as higher wages and consumption boost demand. The German company and China Petroleum and Chemical Corp. this month completed an expansion of an ethylene plant in the eastern city of Nanjing.
China’s economy grew 2.3% in the third quarter from the previous three months, seasonally adjusted, the statistics bureau said on Tuesday. That compared with a revised 2.4% gain for the second quarter.
Asian policymakers face a “delicate balancing act”, with inflation remaining elevated while Europe’s crisis threatens growth, the International Monetary Fund said last week. German Chancellor Angela Merkel’s office on Monday curbed expectations for a breakthrough at a summit in Brussels this weekend.
China’s Xinhua News Agency on Tuesday reported that Chinese vice-premier Wang Qishan and US treasury secretary Timothy Geithner discussed the global economic and financial situation, and bilateral economic relations by phone. It didn’t elaborate.
China has raised interest rates five times over the past year, curbed lending and imposed limits on home purchases to rein in property and consumer prices, and limit the risk of asset bubbles. Home prices gained in fewer than half of70 cities monitored by thegovernment in September from August as sales eased,the statistics bureau data showed.
While inflation was more than 6% for a fourth month in September, Deutsche Bank AG forecasts the rate will drop to 4%—the government’s full-year target—in December.
Ailing Tan in Singapore and Zheng Lifei in Beijing contributed to this story.