NOMURA ON CHINA GDP: Whatever

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China’s economy did something that it’s never done before in the three months to September – at least in modern times – recording a year-on-year growth rate of 6.7% for the third quarter in a row.

While assisted by government investment and rapid credit growth, for the moment, the slowdown in economic growth has been halted.

However, not everyone is impressed with how the result was achieved.

Yang Zhao and Wendy Chen, research analysts at Nomura, are among that list.

“Q3’s resilient growth appears to have been underpinned by post-flood reconstruction, the overheated property market and fading base effects from last year’s stock market bubble,” the pair wrote shortly after the GDP report was released.

Essentially, it was underpinned by a former bubble, a potential bubble (depending on who you ask), along with temporary effects stemming from a series of natural disasters.

Although Zhao and Chen aren’t enthusiastic about the reasons underpinning the result, the data is the data and as a consequence they’ve raised their 2016 real GDP growth forecast up to 6.6% from 6.5% “as Q3 growth was stronger than we expected”.

However, they’re not all that optimistic about what lies ahead, suggesting that they “see signs of momentum losing steam in September, notably in industrial production and retail sales growth”.

“The boost from post-flood reconstruction has been fading and the recent crackdown on the overheated property market should start to pressure property investment and sales,” they wrote. 

“We maintain our Q4 GDP growth forecast of 6.4% year-on-year.”

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