China’s Q3 GDP release came in slightly below expectations today, slowing to (just) 9.1% from a year earlier, marking its weakest pace in more than two years. Although not as robust as expected, most analysts think the data points to an economic soft landing and that a significant loosening of monetary policy is unlikely.
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What should you be watching going forward? According to the Wikileaks diplomatic cables, China’s powerful Vice-Premier Li Keqiang told the American ambassador he paid little attention to official data on industrial production and GDP, preferring to focus on railroad cargo volumes, power consumption and bank loans as more reliable metrics for growth. As seen in the accompanying chart, rail freight growth does seem to have had a decent track record in leading GDP in recent years so this may be worth keeping an eye on.
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If China’s growth continues to slow down, who is most at risk? As the chart below reveals, Australia and Japan have a significant share of their total exports going to China, and China has been an increasingly important customer for Europe, especially Germany.
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