China’s economy rebounded at a faster-than-expected pace in the third quarter, official statistics have finally revealed.
Gross domestic product (GDP) rose 3.9% in the July to September quarter over 2021, official data showed on Monday.
That growth was boosted by government measures to revive activity, above the 3.4% pace forecast in a Reuters poll and quickening from the 0.4% pace in the second quarter
However, strict Covid curbs, the ongoing property slump and risks of a global recession will hinder Beijing’s efforts to foster a robust revival over the next year.
Weak demand at home and slowing exports point to a bumpy recovery as China looks set to continue with its existing zero-Covid strategy after the country wrapped up its twice-a-decade leadership reshuffle on Sunday, with Xi Jinping securing a third term as general secretary of the ruling Communist Party.
Stocks and Yuan Down
Hong Kong stocks tumbled and Chinese stocks fell on Monday, with the yuan weakening, after the new membership line-up of China’s top governing body heightened fears among investors that Xi will double down on ideology-driven policies at the cost of economic growth.
On a quarterly basis, GDP rose 3.9% in the third quarter, versus a revised drop of 2.7% in April-June.
The data was originally due to be released on October 18 but was delayed amid the key Communist Party Congress last week.
“The Chinese economy has great resilience, potential and latitude,” Xi told reporters on Sunday as he unveiled the top leadership team of the Communist Party for the next five years.
“Its strong fundamentals will not change, and it will remain on a positive trajectory over the long run.”
The economy was buoyed by the manufacturing sector, with separate data showing industrial output in September rose 6.3% from a year earlier, beating expectations for a 4.5% gain and 4.2% in August.
Despite the rebound, the economy faces challenges on multiple fronts at home and abroad. China’s pandemic curbs and strife in its key property sector have exacerbated the external pressure from the Ukraine crisis and a global slowdown due to interest rate hikes to curb red-hot inflation.
A Reuters poll forecast China’s growth to slow to 3.2% in 2022, far below the official target of around 5.5%, marking one of the worst performances in almost half a century.
Exports Up, Home Prices Down
In signs of continued strain, exports grew 5.7% from a year earlier in September, beating expectations but coming in at the slowest pace since April. Imports rose a feeble 0.3%, undershooting estimates for 1.0% growth.
Retail sales grew 2.5%, missing forecasts for a 3.3% increase and easing from August’s 5.4% pace, underlining still fragile domestic demand.
In particular, catering sales dropped 1.7% in September from an 8.4% gain in August on tighter Covid control measures.
The surveyed urban jobless rate nudged up to 5.5% in September, the highest since June, with the unemployment rate for job seekers between the ages of 16 and 24 at just under 18%.
More crucially, month-on-month new homes prices fell for the second straight month in September, reflecting the continued homebuyer aversion in the economically vital sector as indebted developers raced to pool resources and deliver projects on time.
“This set of data sends an important message that even Covid measures have become more flexible as it depends on the number of Covid cases, lockdowns are still a big uncertainty to the economy with the background of the real estate crisis,” Iris Pang, chief China economist at ING, said.
“This uncertainty means the effectiveness of pro-growth policy would be undermined.”
Policymakers had rolled out more than 50 economic support measures since late May, seeking to bolster the economy to ease job pressures, even through they have played down the importance of hitting the growth target, which was set in March.
New bank lending in China nearly doubled in September from the previous month and far exceeded expectations, helped by central bank efforts to revive the economy.
“On the policy front, the overall policy will remain supportive,” said Hao Zhou, chief economist at Guotai Junan International.
“In our view, further policy impetus is required to buoy economic recovery, but additional interest rate cuts are unlikely during a period of aggressive global central bank rate hikes.”
- Reuters with additional editing by Jim Pollard