Despite the shuddering pop of China’s stock market bubble during the September quarter, something that saw the benchmark Shanghai Composite index lose 45% in a little over two months, China’s financial sector still contributed a remarkable amount to overall economic growth during the quarter.
According to analysis conducted by Yang Zhao, Chang Chun Hua and Wendy Chen, research analysts at Nomura, China’s financial sector contributed around 1.1 percentage points to the nation’s overall Q3 GDP figure.
While less than the 1.3ppts and 1.4ppts of growth the sector added in the first two quarters of this year – something that coincided with the breakneck rally in China’s stock market that saw the Shanghai Composite briefly gain more than 150% in just 12 months – the contribution to growth is still remarkable, some 0.4-0.5 percentage points above its historic average.
Excluding financial services, Nomura suggests that China’s services sector provided the largest boost growth at 2.9 percentage points, while industry and construction, until recently the main driver of economic activity, saw its contribution slow to just 2.5 percentage points.
Although the trio suggest growth in China’s non-financial sectors will likely stabilise due to additional fiscal and monetary policy easing, they believe that the boost provided by the financial sector will fade in the current quarter.
“We expect the non-financial sectors to stabilise somewhat due to policy easing, but only at a relatively low level. Given that support from the financial sector is likely to fade due to the high base in Q4 last year, we remain comfortable with our real GDP growth forecast of 6.4% for Q4 and 6.8% for full-year 2015,” they wrote in a research report released overnight.
If they’re correct, it suggests that the 7% annual GDP growth rate targeted by China’s government may be at risk of undershooting to the downside.