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China GDP concerns hide positive figures

China GDP concerns hide positive figures

Better-than-expected Chinese GDP figures have been met with scepticism from suspicious investors, but many commentators suggest other data also points to a rosier outlook for the country’s economy.

Statistics released last week showed the Chinese economy after inflation grew by 6.9 per cent in the third quarter of 2015, down from the 7.3 per cent in same period in 2014 and the 7 per cent recorded in the first two quarters of this year.

Crucially, the figure was higher than the 6.8 per cent economists had expected, adding further to the suspicion that the country’s official economic data is not painting a true picture.

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“This all presents perfectly for the government and smacks of the usual manipulation, which bears little reality to what is being suggested by other statistics,” Rowan Dartington’s Guy Stephens said.

Most of the concern centres on the true nature of the slowdown in China’s ‘old’ economy – the resources-driven, infrastructure-led boom that has long been a principle driver of growth in the country.

Sceptics suggest figures based on power consumption and similar metrics reveal a more notable slowdown. Moves such as last week’s interest rate cut add weight to this theory.

By contrast, optimists say China’s consumption towards a consumer-driven economy is still on track, pointing to the resilience of service sectors.

Liontrust’s Mark Williams, manager of the firm’s Asia Income fund, tends to fall into this camp.

He said: “Looking at the more service-oriented data, there are signs that the fourth quarter is beginning to show stabilisation, and even a sliver of a recovery in some areas.”

The view is supported by Capital Economics, in spite of the forecaster being critical of overall GDP figures. “We believe it is primarily industrial growth that is exaggerated and are more willing to take the strength in services at face value,” said Julian Evans-Pritchard, the firm’s China economist.

Neptune head of Chinese equities Douglas Turnbull acknowledged the real GDP growth rate might be between 5 and 6 per cent.

But he also suggested that the figure was “recovering from a weaker-than-trend moment”, and a version of this sentiment had begun to find favour among other observers.

WisdomTree Europe director of research Viktor Nossek said that while the broader economic slowdown showed little sign of improvement, “credit formation [is] improving and bank lending to the real economy [is] increasing.”

“Renewed credit growth can be seen as a positive signal for the stabilisation of global financial conditions,” he added.

Indeed, two months on from China’s Black Monday on August 24 – which sparked severe global stockmarket falls – the mood is more optimistic.

For example, a survey by Citigroup produced earlier this month showed 62 per cent of investors thought China would experience a “soft landing, followed by a tepid recovery”, while just 19 per cent suggested the country was set for the most serious option, a “hard landing, followed by global recession”.