Growth rate target in sight but bumpy road ahead

Editor's note: The National Bureau of Statistics of China recently released the economic data of the third quarter. Here five economists we interviewed from around the world share their views on the report and look at the full-year picture. 

L-shaped growth is still immature but housing risks are controllable

Margit Molnar, Head of China Desk, Economics Department of OECD

Magit Molnar

"Given that we already have the data for the first three quarters of the year, the whole-year performance is basically determined. The fourth quarter data will not influence the overall rate much. So, the growth target will be met and the year-end growth rate will be beyond expectations of many forecasters.

As so far we have not come any close to the vertical part of the "L shape". The growth has so far been slowing gradually and even a somewhat faster slowing growth trajectory could be feasible without much disruption. Sharp deceleration, however, should be avoided.

Ａ burst of the bubble of the property markets would unlikely lead to systemic risk. In China, regulations with regard to housing loans are very stringent: for instance you cannot collateralize your house to take up consumption loans, and down payment ratios are high. Also, home purchase restrictions make it impossible to buy up a large number of apartments and in some cities more so for non-residents." More to read

 

No doubt China will reach full-year target but downward trend expected in 2017

Yeomin Yoon, Professor of Finance and International Business, Seton Hall University

Yeomin Yoon

"Although the fourth quarter growth rate could be a bit lower than 6.7% at an annual rate, depending upon the speed and strength of government's reform activities, government's full-year target for the entire year would be met without difficulty.

Real estate investment seems likely to moderate in the near future, and this will put the economy on a bit downward trend in 2017.

Economic history amply demonstrates that no country maintained such high, dynamic economic growth rates as China did for the last 35 years, for which China's policymakers should be given credit. History also shows that no country can maintain double-digit growth rates for a long time, violating the law of gravity. China's economic growth rates will slow down but to rates much higher than the rates of others for the foreseeable future. "

 

Too early to be optimistic about China's economy

Yao Shujie，Professor of Economics, University of Nottingham and Chonging University

Yao Shujie

"One encouraging point about the Chinese economy is its ability to improve energy efficiency, reducing energy intensity for each additional unit of GDP by 5.2 percent. Furthermore, income per capita continues to rise, at a nominal rate of 8.4 percent, or a real rate slightly lower than GDP growth. People's rising incomes have been attributed to a relatively high level of employment, as China manages to create more than 10 million new jobs in the first three quarters of the year.

But it is too early to be fully optimistic about China's economic prospective as one cannot be absolutely certain that economic growth may not go any lower.

The rising house prices in the so-called first-tier cities of Beijing, Shanghai, Shenzhen and Guangzhou can become a grave uncertainty for the Chinese economy. Rising house prices have been a result of government land sales policy which is also deterring the integration of poor and rural migrants into cities."  More to read

 

Risk of housing industry under control while the growth rate to fall further

Leon Berkelmans，International economy program director with Lowy Institute

Leon Berkelmans

"I think there is probably still scope for the growth rate to fall further. Demographic headwinds continue to affect the economy, and urbanization is not the force it once was to push growth rates higher. Productivity growth also is of concern, as is private sector investment. The drop in private sector investment is of particular concern because it shows that entrepreneurs do not have confidence in the economy at the moment.

We have seen successive waves of booms and busts in the property market in China for a number of years. I think what we are seeing at the moment repeats that pattern. I would be surprised if there was a crisis this time. One distinctive feature of the boom this time around is the increase in mortgage debt, but the overall level is still small. I think the bigger problem for the Chinese economy is the trajectory of corporate debt. "

 

Beijing sees cyclical stabilization and secular challenges

Dan Steinbock, Guest Fellow of Shanghai Institutes for International Studies (SIIS)

Dan Steinbock

"Beijing's effort to rebalance the economy toward consumption and innovation has begun. In the first three quarters of the year, consumption accounted for 70 percent of GDP growth, almost twice as much as 37 percent attributed to investment.

However, the key problem in China is not a cyclical hard landing, but medium-term rebalancing; a secular challenge, which must be achieved as the economy is decelerating - and balanced with the reduction of local debt, property markets' disruptive fluctuations, the SOE reforms and the liberalization of the financial sector." More to read