China’s economy grew at a faster than expected rate in the third quarter, suggesting the recent flurry of policy measures is helping to bolster a tentative recovery in the world’s second-biggest economy.
Rapidly weakening growth in China since the second quarter has prompted authorities to step up support, with Wednesday’s data indicating the stimulus is starting to gain traction, although a property crisis and other problems continue to pose risks.
Gross domestic product (GDP) grew 4.9% in July-September from a year earlier, data released by the National Bureau of Statistics showed, compared with analysts’ expectations for a 4.4% increase but slower than the 6.3% expansion in the second quarter.
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On a quarter-by-quarter basis, GDP grew 1.3% in the third quarter, accelerating from a revised 0.5% in the second quarter and above the forecast for growth of 1%. Consumption and industrial activity in September was also better than expected.
Beijing has in recent weeks launched a raft of measures, but its ability to spur growth has been hamstrung by fears over debt risks and a fragile yuan, which has been hit hard this year due to widening yield differentials as global interest rates remain elevated, led by the US Federal Reserve’s tightening campaign.
“It seems that all of that stimulus is finally beginning to take effect, with a broad beat from growth, retail sales, industrial production and unemployment,” Matt Simpson, a senior market analyst at City Index in Brisbane, said.
The government is walking a tightrope as it tries to restore economic equilibrium. Policymakers are having to navigate a domestic property crisis, depressed private sector confidence, a slowdown in global growth and tensions with the US over trade, technology and geopolitics.
The recovery momentum suggests the government’s full-year 2023 growth target of about 5% is likely to be achieved.
Industrial output in September grew a stronger than expected 4.5% from a year earlier, but the pace was unchanged from August, according to the separate data. Retail sales, a gauge of consumption, also beat expectations, rising 5.5% last month.
But a deepening downturn in the property sector, which accounts for nearly a quarter of economic output, poses a big challenge to policymakers as they seek to keep growth on track, analysts said.
The latest data underlined those worries. Property investment in the first nine months of 2023 fell by 9.1% from a year earlier, after slumping 8.8% in January-August.
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The faltering sector has hit some of the biggest real estate firms in the country including Country Garden, China’s biggest private property developer.
“In the grand scheme of things, I don’t think individual developers running into further financial turbulence will be enough to derail things. The problems of the developers have been known to the market for some while now,” Frederic Neumann, the chief Asia economist and co-head of global research at HSBC, said.
The International Monetary Fund on Wednesday downgraded its 2023 and 2024 growth forecasts for China, saying the property slowdown could cause the country’s GDP to decline.