China’s economy grew faster than expected in the September quarter, providing some near-term support for Australian commodity demand but leaving questions over how much benefit will flow through to iron ore producers.
Gross domestic product expanded 4.5% from a year earlier, accelerating from 4.3% in the June quarter and beating market expectations.
Industrial production was one of the stronger contributors, rising 5.5%, while retail sales also performed better than expected.
For Australia, the headline growth figure is encouraging because China remains its largest trading partner and the dominant customer for Australian iron ore.
However, the composition of the growth is less supportive for traditional Australian commodity exports.
Property weakness remains problem
Chinese property investment fell 20.6%, while fixed-asset investment declined 7.2%.
That matters because construction and infrastructure investment are among the most steel-intensive parts of the Chinese economy and therefore key drivers of iron ore demand.
Export-led manufacturing growth can boost overall Chinese GDP without generating the same demand for Australian bulk commodities as a domestic property or infrastructure boom.
Iron ore was trading around US$91 a tonne on Tuesday, while Australian mining shares were under pressure despite the stronger-than-expected Chinese GDP figures.
The Australian dollar was also hovering below US70 cents.
China’s latest numbers therefore present a mixed picture for Australia.
The world’s second-largest economy is avoiding a sharper slowdown, but continuing weakness in property means Australian miners may not receive the full benefit normally associated with stronger Chinese economic growth.
