The Economy

China’s Growth Rate Slows to 6.9% in Q3

The latest GDP reading is the worst in nearly seven years and increases pressure on Beijing to stimulate the economy.
Katie Kuehner-HebertOctober 19, 2015

China’s economic growth is continuing to slow, increasing pressure on the government to further cut interest rates and enact even more stimulus measures.

The National Bureau of Statistics of China said Monday that the country’s economy grew 6.9% percent between July and September from a year ago, down from 7% in the previous three months.

Even though China’s central bank has cut interest rates five times since November and reduced banks’ reserve requirement ratios three times this year, the third-quarter GDP reading was still the worst since the first quarter of 2009, when growth fell to 6.2%, according to Reuters.

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President Xi Jinping told Reuters in an interview over the weekend that the government was working hard to improve the economy. Other sources said policymakers believe they can halt 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%.

A “burst” of earlier government stimulus measures comes into force in coming months, but Monday’s data has analysts concerned that those measures may not be enough.

“As growth slows and risk of deflation heightens, we reiterate that China needs to cut reserve requirement ratio by another 50 [basis points] in Q4,” ANZ Bank economists 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.”

The latest Reuters quarterly poll showed economists expect the central bank will cut interest rates by another 25 basis points and lower the amount banks must hold as reserves by 50 bps by the end of the year.

The same poll predicted economic growth of 6.8% in the fourth quarter, easing to 6.7% in the first quarter of 2016.

“What keeps China going at the moment is consumption but this can not fully offset those negative pressures on growth and therefore  even though we see some stimulus coming from the government and we see that having some impact  it’s not enough to prevent growth from sliding further,” Louis Kuijs of Oxford Economics told the BBC.