Stimulus may be on hold in lieu of better growth in China

Chinese economists bet that the central government may slow the pace of releasing new stimulus policies for boosting economic growth in the fourth quarter because recent indicators show the economy is warming up and global demand is expected to rebound moderately.

Top policymakers have shown a cautious stance on taking further steps to ease fiscal and monetary policies, learning lessons from the rushed 4 trillion yuan ($630 billion) investment package four years ago.

Even though a change in the country’s top leadership is going to take place at the 18th National Congress of the Communist Party of China, which is scheduled to open on Nov 8, macroeconomic policies will likely remain stable for the rest of this year, analysts said.

Their comments are based on a recent favorable turn in the economic outlook. After seven sequential quarterly declines, the world’s second largest economy started to show positive changes based on the effects of the previous easing measures.

The growth in China’s gross domestic product continued to slow in the third quarter to 7.4 percent from a year ago, down from the 7.6 percent year-on-year rate in the second quarter, according to the National Bureau of Statistics data released on Oct 18.

Weakened global demand was the main force in dragging down expansion. In the first three quarters, net export value lowered the whole GDP by 0.4 percentage points, contributing a negative 5.5 percent to growth, according to the data.

“Domestic demand, which consists of consumption and investment, will be the engine to cause the economy to rebound,” said Pan Jiancheng, deputy director-general of the bureau’s China Economic Monitoring and Analysis Center.

Domestic consumption accounted for 55 percent of GDP, driving growth up by 4.2 percentage points in the first nine months. Investment accounted for 50.5 percent of the increase, or 3.9 percentage points, the bureau said.

Wang Tao, chief economist in China with UBS AG, said the risk of economic slowdown has decreased, supported by the previous fine-tuning, and the global situation may remain stable in the fourth quarter.

Via – Xinhuanet


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