China’s Economy Regains Momentum in Third Quarter, Exceeding Growth Estimates
China’s economy has shown signs of recovery in the third quarter, with the gross domestic product (GDP) expanding by 4.9% from a year ago, according to the National Bureau of Statistics (NBS). This growth rate surpasses the estimate of 4.4% predicted by analysts in a Reuters poll and brings Beijing’s annual growth target within reach.
In the first nine months of 2023, the Chinese economy grew by 5.2% from the previous year. Zhiwei Zhang, president and chief economist for Pinpoint Asset Management, stated that the growth target of around 5% is on track to be achieved.
On a quarterly basis, the economy grew by 1.3% from July to September, which is faster than the 0.8% growth recorded in the previous quarter. Consumer spending has emerged as a bright spot during this period, according to NBS data. However, the real estate sector continues to be a drag on the overall economy. Property investment decreased by 9.1% in the first nine months of 2023 compared to the same period last year.
The property market, which once accounted for up to 30% of China’s economy, has been in crisis for over two years due to government restrictions on developers’ borrowing. This downturn is expected to continue and pose a significant threat to China’s growth prospects in the coming years.
Despite these challenges, China had a solid start to the year after recovering from three years of COVID-19 restrictions. However, the recovery stalled in the second quarter due to weak consumer spending, a slump in the real estate market, and muted global demand for Chinese manufactured goods.
In an effort to revive growth, Beijing has implemented various measures, including slashing interest rates, lifting restrictions on home and car purchases, accelerating infrastructure projects, and loosening capital controls to attract foreign investment.
Recent data suggests that these policy measures have had a positive impact on the economy. Analysts from Capital Economics stated that there are enough positive signs to suggest that the economy has turned a corner. They expect the policy support to continue in the coming months.
Further data released by the NBS shows signs of stabilization. Retail sales jumped 5.5% in September, the fastest pace of growth in four months, driven by increased spending on festivities-related goods and services ahead of the extended Golden Week holiday. Industrial output rose 4.5% in September, matching the growth recorded in August.
Unemployment in urban areas also dropped unexpectedly, with the September rate falling to 5%, the lowest level since November 2021. However, no information was provided on youth unemployment, which reached a record high of 21.3% in June before the release of data was suspended.
The struggling property sector continues to contract, with new housing starts declining by 23.4% year-on-year in September. Fresh housing construction is now at its lowest level since 2005, indicating caution among developers.
Looking ahead, economists have revised their growth forecasts for China’s economy. Moody’s Analytics expects the economy to expand by 5% in 2023, slightly higher than their previous estimate of 4.9%. The World Bank also maintained its forecast of 5.1% growth in 2023 but decreased its 2024 forecast from 4.8% to 4.4% due to persistent challenges such as high debt, weaknesses in the property market, and an aging population.