Never mind the quantity, feel the quality. Like the communiqué issued at the conclusion of the Communist Party’s annual plenary session last weekend, Thursday’s statement from China’s National Bureau of Statistics, presenting third-quarter data, was full of good stuff about adjustment of economic structures, and prioritising reform over absolute growth. Observers are invited to conclude that the credit and investment boom that kept China ticking over through the crisis was a quick fix; a more sustainable balance of consumption, investment and net exports is just around the corner.
The data itself, however, suggests otherwise. As usual, there is no precise breakdown of demand. But it is telling that the rate of growth in retail sales (a workable proxy for private consumption) continues to lag fixed-asset investment. Year-on-year growth in FAI slowed only marginally from the second quarter (and for all Hu Jintao’s talk of “inclusive growth,” spreading the proceeds of wealth around the country, urban FAI continues to rise faster than rural). Residential investment, accounting for about a quarter of the total, has been barely checked by several rounds of corrective measures this year; floorspace started, a proxy for housing starts, rose by 61 per cent, down from 77 per cent in the second quarter. A $65bn trade surplus, meanwhile, bigger than the first and second quarters’ combined, is evidence of nagging external imbalances.
Intentions to reform seem genuine enough. It is obviously in China’s best interests. Thursday’s consumer price inflation number – a lower-than-expected 3.6 per cent – supports the argument that this week’s surprise interest-rate increases were aimed at making investments more efficient by pushing the cost of capital higher. But it is a precondition of better-balanced growth that investment rises more slowly than consumption. That still isn’t happening. The national economy, says the NBS, is showing “good momentum of development.” Momentum, yes; development, no.