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China's Economic Growth Remains Stable 10/19 06:03

   BEIJING (AP) -- China's economic growth stayed relatively stable in the 
latest quarter, buoyed by strength in retail spending and exports, giving the 
ruling Communist Party a boost as President Xi Jinping prepares for a new term 
as leader.

   The economy expanded at a still-robust 6.8 percent annual pace in the three 
months ending in September, a marginal change from the previous quarter's 6.9 
percent, government data showed Thursday.

   Forecasters expect the unexpectedly strong growth this year to weaken as 
Beijing tightens controls on bank lending to cool a rise in debt cited by 
analysts as the biggest threat to economic stability.

   Beijing also faces wider challenges, including surplus industrial capacity 
that is depressing prices of steel and other goods. That has aggravated trade 
tensions with Washington and Europe, which complain low-cost Chinese exports 
threaten jobs.

   "The risk of a China economic slowdown or downside risk scenario of a hard 
landing remains a significant risk to the medium-term global outlook," said IHS 
Markit economist Rajiv Biswas in a report. "The rest of the Asia-Pacific is 
particularly vulnerable."

   Communist leaders are trying to steer China to slower, more sustainable 
growth based on consumer spending instead of exports and investment. By using 
repeated infusions of credit to prevent activity from slowing too abruptly, 
however, Beijing has pushed up debt and delayed the economic rebalancing.

   In a speech Wednesday at a ruling party congress, Xi said China's "prospects 
are bright but the challenges are grim." He said the party would have to take 
big risks and overcome "major resistance."

   Still, companies and investors are looking for signs of the direction and 
speed of economic reform.

   "We will be watching for indications of lowering growth expectations and 
reining in credit growth," said Standard & Poor's economist Paul Gruenwald in a 

   Xi's speech Wednesday repeated promises to give market forces the "decisive 
role" but also affirmed the party's intention to build up state industry, a 
strategy reform advocates say that might waste money and drag on economic 

   The speech "does not imply a significant change in the stance on key policy 
areas," said Louis Kuijs of Oxford Economics in a report.

   Thursday's data showed retail sales rose 10.3 percent in September over a 
year earlier, down slightly from the 10.4 percent rate of the first three 

   That was helped by a 34.2 percent rise in e-commerce spending over a year 
earlier, an 8.1 percent improvement over the same period of 2016.

   The party's decision to go ahead with announcing the data during its 
politically sensitive congress had prompted expectations they would be positive.

   Trade data reported earlier showed export growth accelerated in September to 
8.1 percent from August's 5.5 percent, at least temporarily averting concern 
about politically dangerous job losses in export industries that employ 
millions of workers.

   Investment in factories, office buildings and other fixed assets rose 7.5 
percent in the first three quarters, down from the first half's 8.6 percent 
rate. Factory output rose 6.7 percent in the first three quarters, up from 6 
percent at the same time last year.

   The International Monetary Fund has forecast China's full-year growth will 
hold steady at last year's level of 6.7 percent. The IMF raised its outlook 
twice this year, citing strong government spending.

   The government's growth target is 6.5 percent "or higher if possible."

   "We project a further cooling of growth through 2018," said Kuijs.

   Regulators have cited reducing risk in China's financial system as a 
priority this year. Banks have been told to look closely at borrowers, 
especially those trying to make acquisitions abroad, to ensure they can manage 
their debts.

   The ruling party's plans call for doubling incomes from 2010 levels and 
achieving a "relatively prosperous society" by 2020. In a report, UBS 
economists said that should require growth of just 6.3 percent for the rest of 
the decade.

   Xi's speech Wednesday included no growth target but he said "development is 
the foundation and the key to addressing all problems." 


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