China’s economy grew 4.9% in the third quarter from a year ago, beating forecasts and picking up steam from the second quarter’s growth of 3.9%, buoyed by strong consumer spending and industrial production.
The world’s second-largest economy expanded 1.3% in Q3 compared to the previous quarter. This demonstrates China’s continued recovery following lockdowns earlier this year to contain Covid outbreaks.
September retail sales rose 5.5% year-on-year while industrial output was up 4.5%, exceeding analysts’ projections. This signals that consumer and manufacturing activity is rebounding despite ongoing headwinds in the property sector.
However, China’s cumulative fixed asset investment for January-September rose only 3.1%, slightly below the predicted 3.2% rise, as the property crisis continued to weigh heavily.
Real estate investment plummeted 9.1% in the first nine months, though infrastructure investment jumped 12%. This illustrates the divergence between China’s ailing housing market and recovering broader economy.
The third quarter GDP print indicates China’s economy is stabilizing and may achieve the government’s 2022 full-year growth target of around 5%.
Stronger September Data Points to Momentum
China’s economic data for September also topped forecasts, pointing to gathering momentum after a shaky first half.
Retail sales climbed 5.5% in September, exceeding the projected 4.5% rise. Robust sales suggest consumer demand is recovering despite Covid disruptions and inflationary pressures earlier in 2022.
Meanwhile, industrial production grew 4.5% year-on-year in September, faster than the forecasted 3.6% pace. This demonstrates solid manufacturing activity as supply chain snarls ease and export demand holds up.
However, China’s cumulative fixed asset investment increased only 3.1% in January-September, slightly trailing expectations. Sliding property investment remains a persistent drag, falling 9.1% for the first nine months of 2022.
On a positive note, China’s urban unemployment rate dipped to 5.0% in September from 5.3% in August, indicating an improving labor market.
Overall, the latest monthly figures show consumption and manufacturing gaining momentum even as the real estate slump continues to weigh on investment.
Property Crisis Persists But Policy Support Building
Ongoing turmoil in China’s property sector remains a key headwind, as evidenced by the 9.1% plunge in real estate investment so far this year. Defaults have spiked while home sales and prices have tumbled.
China’s housing market woes stem from overleveraged developers as well as hesitant homebuyers worried about unfinished projects. Regulators have taken steps to ease financing for cash-strapped firms and support buyer sentiment.
In recent weeks, over 50 Chinese cities have introduced property easing measures, including smaller down payments and subsidies. The central bank also cut a key mortgage rate for first-time homebuyers.
While these policy moves may take time to revive the property sector, they demonstrate Beijing’s determination to stabilize the critical real estate industry.
The government has also accelerated infrastructure spending and boosted financing support for the economy this year. But officials are balancing stimulus with curbing debt risks.
Recovery Still Faces Risks But Outlook Improving
China’s Q3 growth beat shows its economy is gradually recovering from the Covid-induced slowdown. But the pace of expansion remains well below the government’s pre-pandemic target of around 6%.
Ongoing weakness in the property market and subdued consumer sentiment pose risks to a more robust rebound. China’s zero-Covid policy and export outlook add uncertainties.
However, economists believe the government still has room to ease monetary and fiscal policy if needed to bolster growth.
Analysts widely expect China will hit its around 5% annual growth target for 2022 or come close. The better-than-expected Q3 GDP print raises confidence in the economy’s trajectory.
While the recovery may be bumpy and uneven across sectors, the latest indicators suggest activity is regaining momentum after bottoming out.
China’s resilience even as major economies falter illustrates its vital role as the Asia-Pacific region’s growth engine. Its steady expansion should aid regional and global growth.
The Q3 numbers confirm China’s economy is stabilizing thanks to policy support. Ongoing targeted easing should allow the country to consolidate its recovery in coming months.
- China’s Q3 GDP grew 4.9% year-on-year, beating forecasts of 4.6% growth and accelerating from the second quarter.
- Retail sales, industrial production, and unemployment also exceeded September forecasts, pointing to gathering momentum.
- But property investment dropped 9.1% in January-September, remaining a drag on growth.
- Policy easing to support the real estate sector and broader economy is gradually taking effect.
- Risks persist from Covid, global slowdown, but analysts expect China to hit around 5% full-year growth target.
- Q3 resilience indicates the economy is steadying and should consolidate recovery ahead.