China's third-quarter GDP data: Five key things to monitor

China's third-quarter GDP data: Five key things to monitor

16 October 2015, 15:29
Anton Voropaev

China’s economic downturn is weakening commodity prices and hurting global economies and businesses alike. A fresh look at just how sharp the slowdown is will be presented on Monday when the country releases third-quarter GDP data. There are several important things to watch:

Hints at more stimulus

China's Premier Li Keqiang is targeting real gross domestic product growth in 2015 of “around 7%”, following actual growth of 7.3% in 2014.

Economic expansion in the first two quarters corresponded to the government target exactly, at least according to its own reports. But analysts expect the rate to decline to 6.7% in the third quarter, which would be the slowest since the trough of the financial crisis. The spokesman for China’s statistics bureau said in September that he believed growth as low as 6.5% would still be considered within the target range. Nevertheless, if it falls below 6.7%, calls for more aggressive stimulus will be more persistent.

GDP deflator

The GDP deflator converts nominal GDP to real GDP by stripping out inflation. Analysts have long suspected that China's statistics bureau manipulates it to forge the closely monitored and politically sensitive headline growth figure. Understating inflation aims to make real growth appear faster than it is. In the first quarter, the deflator was negative at -0.33, which meant the economy was in outright deflation but renewing doubts about its accuracy. It climbed back to positive territory at 0.09 in the second quarter. Another negative reading in the third quarter would again spur concerns about whether the deflator is being used to ease the appearance of volatility.

Doubts about data accuracy

After July’s GDP data release, the spokesman for China’s National Bureau of Statistics took the unusual step of publicly addressing skepticism about China’s official figures - especially the deflator issue. A column in the official People’s Daily newspaper then came. It offered a somewhat more detailed defence of the methodology the bureau uses. If the NBS again speaks to critics at its quarterly press conference, it will unveil how sensitive it is about overall skepticism, the Financial Times says.


The Financial Times reports that Chinese services have become a new driver of growth against the backdrop of slowing manufacturing and construction. Services increased 12.1% in nominal terms in the second quarter, well above 7.1% nominal growth for the economy as a whole. Beijing is actively inspiring this transition. But services growth has been driven by one-off factors, particularly the stock market boom early this year in which securities brokerages raked in huge trading commissions. With the stock market turmoil in the third quarter, growth in financial services almost certainly shrank. Economists will be watching to see if other emerging service sectors such as healthcare, tourism and media can smooth the slowdown.

Fixed assets

Investment in fixed assets remains the backbone of the world's second largest economy, accounting for 44% of overall output in 2014. It also supports global demand for commodities like base metals. But with the property market still stuck in oversupply, investment in housing continues to be hampered. Beijing has tried to fill the gap this year by driving spending on infrastructure such as railways and water treatment. Infrastructure investment rose at a rate of 18.4% a year during the first eight months.

Data to be released Monday will show how aggressively the government is seeking stimulus through infrastructure.

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