Growth Slows, but Xi Is Confident in China's 'New Normal' Economy

Chinese President Xi Jinping at the Asia-Pacific Economic Cooperation summit in Beijing on Nov. 12 Photograph by Mandel Ngan/AFP via Getty Images

The takeaway from today’s release of economic numbers from China? Yes, the economy is clearly slowing, with limited payoff from recent measures aimed at boosting growth. Still, as recent statements by top officials show, Beijing is far from panicking.

Fixed asset investments, or money going into machinery, railways, and property development, increased 15.9 percent in the first 10 months, the National Bureau of Statistics announced today. That was below the 16 percent predicted in a Bloomberg survey of economists. More alarmingly, it was the weakest performance since December 2001.

Retail sales also disappointed, rising 11.5 percent in the first 10 months, compared with the 11.6 percent predicted. Industrial production, hit hard by excess inventories as well as pollution-control policies, also fell below expectations, expanding 8.4 percent through October. “With industry shuttered across key parts of northern China to clear the air for the APEC meeting, November’s growth rate is likely to be weaker still,” Mark Williams, chief Asia economist at Capital Economics, warned in a research note Thursday.

China’s leaders have held off embarking on a major economic stimulus like the one used during the global financial crisis in 2008. Instead, they’ve taken more limited measures, including trying to boost the flagging real estate sector by loosening mortgage requirements and supporting small and midsize enterprises by encouraging banks to lend to them.

At the same time, China’s state planning agency over the past month has sped up approvals for $113 billion in new infrastructure investment into 16 railways and five airports. “Growth momentum remains subdued, although not alarmingly so,” Louis Kuijs, Hong Kong-based chief China economist at the Royal Bank of Scotland, wrote in a note today. “We expect the policy stance to remain supportive of growth.”

In a speech at the just-concluded Asia-Pacific Economic Cooperation forum, President Xi Jinping suggested that slower but more sustainable growth was acceptable. “China’s economic growth has become more stable and been driven by more diverse forces,” Xi said on Nov. 9, citing the increasing importance of consumer demand and innovation rather than investment. “A new normal of China’s economy has emerged,” Xi said, reported the Xinhua News Agency.

China’s leaders have been heartened by the 10.82 million new jobs created in the first three-quarters of the year—more than the 10 million full-year target they set in March. “Senior policymakers emphasize that as long as the labor market holds up, they can accept GDP growth falling somewhat below the government’s target of 7.5 percent,” wrote Royal Bank’s Kuijs.

“Some worry whether the Chinese economy will see further decline in [the] growth rate and fail to overcome difficulties. Indeed, there are risks, but they are not that scary,” president Xi said in his speech.

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