China’s Q3 GDP accelerates at fastest pace this year
China’s gross domestic product—the value of all goods and services produced in the economy—accelerated at its fastest pace in 2013, according to the country’s National Bureau of Statistics. Third quarter GDP advanced 2.2 percent, compared to 1.7 percent in the previous quarter. GDP grew at an annualized rate of 7.8 percent, compared to 7.5 percent the previous quarter.
The third quarter growth confirms the People’s Republic will meet its 7.5 percent annual growth target this year. China’s economic growth has average 10 percent a year over the past three decades, helping to grow the country’s middle class and propelling it onto the global stage. However, the outlook on the world’s second largest economy remains dim after growth began to wane toward the end of the third quarter. China experienced an unexpected fall in exports last month, as well as weaker factory output and sluggish retail sales.
The Chinese economy is at a crossroads, as the government tries to shift to an economic model similar to that of developed countries. As China transitions from an export-driven nation to an economy more geared toward consumption, growth will likely continue to lag over the mid-term. In the first three quarters of 2013 China’s economy grew 7.7 percent, putting it on pace for its worst performance in 23 years.
As the People’s Republic shifts its priorities toward sustained economic growth, economists warn the country’s near-term path could be rocky. China remains heavily dependent on credit to fuel its activities, which has given rise to shadow banking. Smaller companies that are ignored by state-run banks turn to shadow banks to receive loans.
The country’s other challenges include mushrooming local government debt and declining demand for exports.
The economic data show China is a long way from achieving its consumption goals. Consumption represented less than half of the country’s growth in the first three quarters of the year, whereas investment represented 56 percent.
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