China’s economic growth slowed in the third quarter of the year, slipping into single digits for the first time in four years, as the impact of an international slowdown seeped into the world’s fastest-expanding major economy.

The gross domestic product growth rate slowed more sharply than expected to 9 per cent in the July-September period – from 10.1 per cent in the second quarter – as the impact of the global credit crisis and weakness in the domestic property sector was felt.

Li Xiaochao, spokesman for the National Bureau of Statistics, said: “The international financial market is slowing down noticeably and there are more uncertain and volatile factors in the international climate.

“All these factors are starting to release their negative impact on China’s economy.”

Economists had expected the economy to slow to 9.7 per cent, but statistics for the period were always likely to be complicated by the Olympics when Beijing pulled out all the stops to curb pollution, leading to extensive factory closures around the capital as well as transport and visa restrictions that hit output.

Industrial production slowed to 11.4 per cent in the year to September, the lowest rate since 2002, suggesting the economy was losing momentum as the quarter went on.

Zheng Fan, an economist at Tebon Securities in Shanghai, said: “It’s very obvious now that economic growth is slowing quickly, although some indicators such as exports are holding up due to lagging effects. Economic growth will continue to trend down.”

China’s growth rate still looks remarkably robust compared with other major economies, but policymakers know they need to keep expansion at around 8 to 9 per cent to meet their goal of reducing poverty while minimizing job losses that could fuel social unrest.

Only last week, the closure of a large toy factory in southern Guangdong province prompted hundreds of angry workers to besiege the local government office to demand their unpaid wages.

The property market, which accounts for about a quarter of fixed-asset investment, is weakening due to tight credit and government curbs aimed at preventing the kinds of bubbles that have felled the British and US economies. Steel and aluminium firms have already slashed output because of slumping prices.

But the government is already responding. A meeting of the State Council, or cabinet, at the weekend confirmed measures to pump up growth, including tax cuts and accelerated investment in infrastructure. Top of the list was a plan to build many more miles of railway lines. Beijing has budgeted 1.2 trillion yuan ($175 billion) for railway investment in 2006-2010 – more than four times the sum in the previous five years.

Jing Ulrich, chairman of JP Morgan Equities in Hong Kong, said: “In the coming months we expect policymakers to introduce further relief measures for the export sector (including increased export tax rebates) and to loosen restrictions on the property sector, while ensuring an adequate supply of mass-market housing.”

With inflation concerns receding, the central bank is expected to build on two cuts in interest rates since mid-September. Consumer prices rose 4.6 per cent in the year to September down from a 12-year peak in February of 8.7 per cent. Ms Ulrich said the further monetary easing could benefit the property sector, where the government had introduced credit curbs to prevent a bubble.

The government acknowledged that China’s white-hot export growth was now slowing. Mr Li said: “Some companies are running into trouble.”

But the government had now changed its focus from the "two prevents" of preventing overheating and preventing structural inflation into the concepts of "preserving" growth and "controlling" inflation. Mr Li said: “Thanks to the implementation of these policies, China has maintained sound and rapid growth. The overall situation is sound, and the basic situation is unchanged."

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