MNI Analysis: China Q3 GDP Growth Slows To Weakest Since 2009

--GDP Growth Down To 6.5% y/y; Undershoots Expectations

--Industrial Output Growth Falls Below 6%

--Investment Up From All-Time Low

     BEIJING (MNI) - China's GDP growth slowed to its weakest pace in Q3 since

the global financial crisis, data from the National Bureau of Statistics showed

Friday. Growth cooled to 6.5% y/y from 6.7% in Q2 and 6.8% in Q1, coming in

below the MNI median forecast of 6.6%. The decline left growth at its softest

level since Q1 2009, when it fell to 6.2%.

     --INDUSTRIAL SLOWDOWN

     Other figures released today showed industrial output growth fell to 5.8%

y/y in September, down from 6.1% in August. The timing of China's Mid-Autumn

Festival, which reduced the number of work days in September, was partly to

blame, while the latest round of environmental protection inspections also

depressed activity.

     In terms of sectoral developments, automobiles, mobile phones, computers,

integrated circuits and industrial robots all registered a slowdown in annual

production growth, partly due to a high base last September, but also due to

recent weakness. Indeed, auto makers cut output by more than 10% in September

amid slowing sales. Electricity output growth, meanwhile, slowed from 7.3% y/y

in August to 4.6% y/y in September.

     --ROBUST INVESTMENT

     Fixed-asset investment grew by 5.4% y/y in the January-September period,

slightly stronger than the 5.3% MNI median projection and accelerating from a

series low of 5.3% in January-August.

     Sluggish infrastructure investment has been the main drag on investment

growth this year, despite local government efforts to boost infrastructure

projects by issuing more special bonds. Infrastructure investment in the first

three quarters of the year increased by just 3.3% y/y, the lowest growth rate

since 2014, weighing on overall economic growth, according to the Financial

Research Center at the Bank of Communications.

     Property investment growth slowed slightly in September, reflecting the

impact of a series of policies designed to cool the overheating housing market.

Property investment increased 9.9% y/y in the first nine months of 2018,

slightly pulling back from the 10.1% gain in Jan-Aug, but remaining at a high

level.

     Property developers' confidence regarding the outlook for the sector

remains robust, as indicated by strong land sales and property starts. Over the

first nine months of the year, land sales increased by 15.7% y/y to 193.66

million square metres, while property starts grew by 16.4% y/y to 1.5258 billion

square metres.

     Local government measures, such as Shenzhen's recent move to set

construction and completion time limits for property projects, will help to

boost investment in the sector.

     --RETAIL SALES PICK UP

     Retail sales growth rebounded in September, picking up to 9.2% y/y from

9.0% in August, supported by China's upgraded consumption habits. Final

consumption expenditure accounted for 78% of economic growth in the first three

quarters of the year, highlighting the fundamental role played by consumption in

China's growth model.

--MNI Beijing Bureau; +86 (10) 8532-5998; email: wanxia.lin@marketnews.com

--MNI London Bureau; +44 207-862-7489; email: ukeditorial@marketnews.com

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