China slow to expand

Retail sales picked up last month. Photo / iStock

China's economic growth decelerated in the latest quarter to a six-year low of 6.9 per cent despite repeated interest rate cuts and other stimulus measures.

But the New Zealand dollar was little changed in local trading as the data gave a mixed message, with gross domestic product slowing less than expected, though fixed-asset investment fell to a 15-year low and industrial production was below forecast. The kiwi traded at US67.96c as at 5pm yesterday from US67.95c at 8am and US68.08c on Friday.

China's growth number was ahead of the 6.8 per cent pace of expansion economists were expecting, and while fixed asset investment rose at its slowest pace since 2000 and industrial output was below forecasts, the GDP expansion and stronger services sector helped allay fears about the strength of the world's second biggest economy.

"It's hard to be overly optimistic about the headline number, especially given the range of other data released today," said IG Markets analyst Angus Nicholson.

Growth in industrial production in China for September undershot at 5.7 per cent while nominal GDP came in at 6.2 per cent. Consumer spending accelerated over the course of the quarter, helping to shore up the expansion. Growth in retail sales picked up from 10.5 per cent in July to 10.9 per cent in September.

"China needs to keep retail sales growth steady at more than 10 per cent year-on-year expansion with monetary and fiscal stimulus measures starting to halt the decline in investment," Nicholson said.

Tomorrow's GlobalDairyTrade auction will affect the kiwi dollar that has appreciated strongly over the past fortnight. Some analysts expect to see a flattening in prices, while others expect a small gain.

Trader Michael Johnston said the kiwi dollar was getting a "little bit stretched", having rallied more than 10 per cent from the lows of a few weeks ago. He said the kiwi faced risks to the downside, with the recent appreciation in the currency putting more pressure on the Reserve Bank to cut interest rates further.

Much of China's slowdown over the past five years is self-imposed as communist leaders try to steer the economy to more self-sustaining growth based on domestic consumption and service industry.

"All this indicates the restructuring and upgrading of the Chinese economy are going steadily," said Sheng Laiyun, of the Chinese statistics agency. "The general condition of the economy remains strong."