(Reuters) -China’s economy grew at the slowest pace since early 2023 in the third quarter, and though consumption and industrial output figures for last month beat forecasts a tumbling property sector is likely to maintain calls for more stimulus to revitalise growth.
Data released on Friday showed the world’s second-largest economy grew 4.6% year-on-year in July-September, beating a 4.5% forecast in a Reuters poll but slowing from 4.7% in the second quarter.
KEY POINTS
* Q3 GDP +4.6% y/y (f’cast +4.5%, Q2 +4.7%)
* Q3 GDP +0.9% q/q (f’cast +1.0%, Q2 +0.5% revised)
* Sept industrial output +5.4% y/y (f’cast +4.5%, Aug +4.5%)
* Sept retail sales +3.2% y/y (f’cast +2.5%, Aug +2.1%)
* Jan-Sept fixed asset investment +3.4% y/y (f’cast +3.3%, Jan-Aug +3.4%)
* Jan-Sept property investment -10.1% y/y (Jan-Aug -10.2%)
MARKET REACTION:
The blue-chip CSI300 Index was down 0.4%, while the Shanghai Composite Index eased 0.33% in early trade after the data.
COMMENTARY:
SHANE OLIVER, CHIEF ECONOMIST, AMP, SYDNEY
“I doubt that these numbers are affected by stimulus announced in September. I suspect that it’s just bit of normal volatility for September. Retail sales have been in the range they have been for the much of last year and 3.2% is still fairly subdued.
“So, it doesn’t really change the story much on China. It’s continuing to grow, but at a pretty subdued pace by historical standards and given where we are at, in the absence of big stimulus, the odds are we’ll end up with growth running yeah below the 5% level – could be 4.6%, 4.7% for the year in the absence of stimulus. Stimulus could help, but it would have to work fairly quickly to boost current-quarter growth and we’re already two weeks into the quarter, so time is running out to boost growth this year.”
ZHIWEI ZHANG, PRESIDENT AND CHIEF ECONOMIST, PINPOINT ASSET MANAGEMENT
“China’s economic growth edged down in Q3 to 4.6% from 4.7% in Q2. While it is a marginal decline, it makes the official growth target of 5% difficult to achieve if this trend continues to year-end.
“This may be why the government decided in the Politburo meeting to change policy stance and boost growth. We are waiting for more clarity on fiscal stimulus. We may have to wait till November to find out details, as the outcome of the U.S. election is probably one factor that will influence the policy thinking in Beijing.”
BACKGROUND
* China has struggled to mount a strong and sustainable post-COVID economic rebound, burdened by a protracted property downturn, massive local government debt and weak private-sector spending.
* The world’s second-largest economy is expected to expand 4.8% in 2024, undershooting the government’s target of about 5%, a Reuters poll showed. Growth is seen slowing further in 2025, to 4.5%.
* Authorities have sharply ramped up policy stimulus since late September, but analysts believe much more is needed, and quickly, to reach the growth target and put the economy on more solid footing next year. Longer-term structural challenges such as overcapacity, high debt levels and an ageing population are also in play.
* The central bank unveiled its biggest stimulus since the pandemic late last month, aiming to pull the economy out of its deflationary funk.
* Investors are now hoping for a clearer and more substantial fiscal policy roadmap at the next meeting of China’s rubber-stamp legislature which is expected in coming weeks.
* Reuters reported last month that China plans to issue special sovereign bonds worth about 2 trillion yuan ($284.43 billion) this year as part of fresh stimulus, but half of that would be used to help local governments tackle their debt problem.
(Reporting by Reuters Asia bureaus; Compiled and edited Subhranshu Sahu)
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