Tue Oct 18 21:00:00 CDT 2016

Consensus Actual Previous Revised
Y/Y % Change 6.7% 6.7% 6.7%
Q/Q % Change 1.8% 1.9%

China's economy recorded steady growth in the three months to September, with year-on-year growth in gross domestic product unchanged at 6.7 percent, the same growth reported in the previous two quarters and in line with the consensus forecast. This has been the weakest growth since the depths of the global financial crisis in early 2009 but leaves the Chinese economy on track to meet the government's full-year growth target for 2016 of between 6.5 percent and 7.0 percent.

GDP growth for the three months to September is broadly in line with monthly data released for this period. Year-on-year growth in retail sales averaged around 10.5 percent over this three months, while growth in industrial production was just over 6.0 percent. PMI surveys have also shown relatively steady conditions in both the manufacturing and services sectors in recent months.

Export growth weakened sharply in September, but this has been offset by strong fiscal support to the economy, with officials appearing to have boosted spending to help ensure the growth target is met. The Finance Ministry today reported year-on-year growth in government spending of 11.3 percent in September, up from 10.3 percent in August and just 0.3 percent in July.

GDP growth was also steady on a seasonally adjusted quarter-on-quarter basis, at 1.8 percent, compared with 1.9 percent in the three months to June (revised from 1.8 percent). Apart from a dip to 1.1 percent in the first three months of this year (revised from 1.2 percent), quarterly growth has been between 1.5 percent and 2.0 percent since mid-2013, reflecting government efforts to target moderate declines in annual growth. In year-to-date terms, GDP grew by 6.7 percent up to the end of September, compared with 6.9 percent for the same period in 2015.

The government's 2016 GDP growth target, announced at the annual National People's Congress in March, was a step-down from the target of "around 7.0 percent" for 2015. Nevertheless, even to meet this more modest target, officials concluded that policy settings would need to be loosened this year, targeting both a higher fiscal deficit and an "easing bias" for monetary policy. Today's GDP data will likely reassure officials that policy adjustments have put the growth target within reach, with officials characterising the economy's recent growth as "better than expected" and better "quality". Further policy easing, however, may still be considered if more up-to-date monthly data start to show weaker conditions towards the end of this year.

Gross Domestic Product (GDP) refers to the final products at market prices produced by all resident units in a country (or a region) during a certain period of time. GDP is the core indicator of the national accounts, and also an important indicator to measure the economic conditions and the level of development of a country or region. GDP is calculated from three approaches -- production, income and expenditure -- which reflect gross domestic product and its composition from different angles.

GDP is the all-inclusive measure of economic activity. The GDP report contains a treasure-trove of information which not only paints an image of the overall economy, but tells investors about important trends within the big picture. GDP components such as consumer spending, business and residential investment, and price (inflation) indexes illuminate the economy's undercurrents, which can translate to investment opportunities and guidance in managing a portfolio.

The data are compiled by NBS and the People's Bank of China (PBoC). Estimates for non-financial corporations, financial corporations, general government, household and the rest of the world sectors are published. The production accounts, distribution and use of income account, and capital account data are compiled by NBS. NBS also develops the financial account by rearranging financial transactions data in the flow of funds accounts compiled by PBoC. There are no breakdowns of government consumption expenditure, gross fixed capital formation, change in inventories and net exports. Household consumption expenditures are broken down into urban and rural. The income components of GDP are only published in the input-output tables. NBS uses the Chinese Industrial Classification of the National Economy.