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China Q3 GDP in focus amid property bubble worries, as Li flags upside

Asset bubbles and debt levels have raised alarm bells about the Chinese economy but unlike earlier this year, there are fewer jitters about China's growth figure due on Wednesday.

A Reuters poll of 58 economists pointed to 6.7 percent on-year gross domestic product growth in the third quarter, steady on the first two quarters of the year as the Chinese government ratchets up spending and a property boom offset stubbornly weak exports.

"With a theme of broader soft-landing, if not stabilization, the data releases may not be excessively damaging," Mizuho's senior economist Vishnu Varathan wrote in a note on Monday.

The froth in property contributed to Morgan Stanley's forecast for a steady Q3 GDP growth rate of 6.7 percent.


The U.S. bank's economists said the forecast reflected cyclical momentum on the back of strong fiscal support, robust housing demand and better-than-expected external demand, which they said was healthier than they had anticipated in the wake of Britain's Brexit vote.

"The ongoing mini-cycle upturn has lasted longer than we expected, largely driven by the strong fiscal support through investment activity and car sales over the past few months," economists Robin Xin and Jenny Zheng wrote in a recent note.

Chinese Premier Li Keqiang gave markets a heads up on Oct. 10 by saying said country's economy performed better than expected in the third quarter and that debt risks were under control.

"China's economy in the third quarter not only extended growth momentum in the first half but showed many positive changes," Li said in the speech delivered in Macau, Reuters reported.

The bustling Pudong financial district in Shanghai reflects China's economic growth in the last few decades.
Johannes Eisele | AFP | Getty Images
The bustling Pudong financial district in Shanghai reflects China's economic growth in the last few decades.

Still, economy faced downward pressure, Li cautioned.

The property market, where some have flagged pockets of bubbles, particularly in the higher-tier cities, has been a concern for China commentators. China's richest man Wang Jianlin recently went as far as to say that the country's real estate market was the "biggest bubble in history."

China's Li said the government would take effective measures to ensure the stable and healthy development of the property market.

The GDP data will follow figures last week that showed steeper-than-expected declines in China's dollar-denominated exports in September and an unexpected drop in imports.

China's exports tumbled nearly 10 percent on-year in dollar terms, and imports dipped 1.9 percent.

The Chinese government is aiming for growth of 6.5 percent to 7 percent this year, a slower pace than the world has become accustomed to over the past two decades.

China's economy is gradually transitioning to a greater reliance on consumption, compared to a previous emphasis on manufacturing, but the transformation hasn't been all smooth sailing; the country logged 6.9 percent growth in 2015, its slowest pace in 25 years.

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