GDP growth holding steady

China's economy grew 6.7 per-cent year-on-year in the third quarter, slightly stronger than expected.

The year-to-date strength of real estate activities has helped to stabilize property and industrial investment and support related consumption. These have more than offset slower infrastructure investment. Private fixed asset investment has improved over the past two months, partly because of property investment, which suggests that some of the recent improvement in corporate revenue and profits may be starting to trickle through.

We expect GDP growth in the fourth quarter to slow modestly to 6.5-6.6 percent year-on-year, with property sales easing in the next couple of months, before slowing more sharply in 2017. The property construction and investment rebound should last a couple of months longer than that of sales, especially as destocking continues.

Given the growth target is attainable and policymakers have concerns over a property bubble and rising leverage, we do not expect any notable credit acceleration or interest rate cut by year-end.

Wang Tao, chief China economist, UBS Investment Bank

Policy change expected in 2017Q2

With annual GDP growth on track to achieve the target range for the year, we believe the government will continue its control on broad credit growth and tightening of the property market in the next two quarters.

Economic activities, especially investment, showed signs of picking up in September. This was in part driven by the recovery of private investment, whose year-to-date growth improved to 2.5 percent from 2.1 percent in Jan-Aug.

With stable growth in the third quarter and the economy on track to achieve the annual growth tar-get, we anticipate the government being more comfortable with its current policy moves in the coming quarters, including control on broad credit growth and property market tightening.

The government will likely loosen policy again in the second quarter of 2017 when growth starts to face pressure from the property market adjustment. We expect GDP growth of 6.4 percent year-on-year in the fourth quarter, 6.2 percent in the first quarter of next year and 6.3 percent in the second.

Zhang Zhiwei, chief economist and head of equity strategy for China, Deutsche Bank

Time to rein in credit growth

Real GDP growth held steady in the third quarter, while the nominal GDP growth rose and investment momentum improved. However, industrial production slowed in September, underscoring that downward pressures on growth remain.

The big question for 2017 and beyond is whether the authorities will continue to aim for overly ambitious GDP growth targets or start to rein in credit growth to put growth on a more sustainable footing.

In September, new bank lending surged and total social financing increased, with trust loans and equity financing particularly buoyant. While China is not at the cusp of a financial crisis, its pace of credit growth is clearly unsustainable.

So far there have been no signs the government intends to start reining in credit growth. However, it is increasingly likely that in the coming years China's leadership will change course and start to reduce credit expansion.

If credit growth is gradually reined in over the coming five years and the credit to GDP ratio peaks in 2022, this would mean GDP growth in the coming years would be about 1 percentage point lower. However, this growth would be more sustainable.

Louis Kuijs, head of Asia economics at Oxford Economics

Mortgage loans not a magic bullet

The steady economic growth in the third quarter has not only won precious time for the country to further boost domestic consumption and take up the slack for slowing trade growth. It has also high-lighted the limitations of a red-hot property market fueled by easy credit to drive overall economic growth.

Data from the People's Bank of China showed that, in the first three quarters, China's new housing loans to individuals rose to 3.63 trillion yuan ($544.3 billion), or 35.7 percent of new loans. With such unprecedented credit support, it is no wonder that the property sector has been making an "obvious contribution" to the country's GDP growth. But is growth fueled in this way desirable or affordable?

Such strong credit expansion only has a very limited impact on bolstering real GDP growth in the short term.

Even worse, the scenarios of an unchecked housing bubble that increases costs for all other enter-prises and a collapse in housing prices that leave many Chinese families and banks brutally hit would considerably undermine investors' confidence in the country's growth prospects in the mid-and long-run.

It is time for policymakers to abandon any illusion they may have that the flood of mortgage loans is a way to lift all boats.

Zhu Qiwen, senior writer with China Daily

(China Daily 10/21/2016 page9)