At 4.6%, China’s Q3 growth weakest since early 2023 but slightly above estimate

China’s economy grew 4.6 per cent in July-September quarter, slowest since early 2023 despite consumption and industrial output figures for last month beat forecasts.

The latest data released by the Xi Jinping government revealed the world’s second largest economy slowing from 4.7 per cent annual growth in the previous quarter and falling short of the official target of “about 5 per cent” growth for 2024, the numbers that analysts consider ambitious without more aggressive measures to spur consumer demand and spur a recovery in the ailing property sector.

For China, its tumbling property sector continue to be big challenge as the country tries to boost growth.

The National Bureau of Statistics in a statement said that China’s economy was “generally stable with steady progress” even in the face of a “complicated and severe external environment” and complicated domestic economic development.

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Beijing’s economy has remained sluggish despite the lifting of COVID-19 restrictions towards the end of 2022 as consumer confidence continue to be weak and the real estate market remains a drag on the economy.

A slew of measures have been announced in the recent weeks by the Chinese policymakers with an aim to boost the ailing economy. It included reduction in mortgage rates for existing homes and allowed banks to lend more by reducing reserve requirements.

China’s growth rate in the first three quarters of the current year was 4.8 per cent. On a quarterly basis, the economy expanded 0.9 per cent in the quarter that ended in September, up from 0.7 per cent growth in the previous quarter.

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Reaction to China’s economic data

A report by Reuters quoted Woei Chen ho, economist, UOB, Singapore as saying, “The overall tone is actually not bad, given that the nominal GDP itself has also stabilised, I think the pace of growth is similar to what we saw in the second quarter. So, the market is actually taking this in stride. The focus is actually on what the government is going to do next in terms of the size of the fiscal stimulus.”

Meanwhile, the report cited Benson Wu, China and Korea economic, Bofa Global Reasearch, Hong Kong, as saying, “The recent coordinated easing and better policy communication is a good starting point, in our view. We currently expect the annual GDP growth at 4.8 per cent this year, and could be reaching the lower bound of the ‘around 5 per cent’ target.

“The growth for the coming year will be largely dependent on the fiscal package that is yet to be announced, in our view,” Benson Wu said.

“The GDP data confirmed that China faces excess supply and lack of demand. China is seen falling into a fully-fledged deflation and such a situation is even more deepening. China has started to roll out a flurry of stimulus measures since last month. I’m not sure if those measures are sufficient or not. What I can say is that Chinese authorities are missing the mark – they are not doing what should be done while leaving structural problems unattended,” the report quoted Toru Nishiama, Chief Economist with Tokyo’s Dai-Ichi-Life Research Institiute as saying.

“If we look at the data that we saw, it’s a little bit better than expected, but in the end, it also does indicate growth by and large has been decelerating,” Nishiama said.

Shane Oliver, Chief Economist, AMP, Sydney said: “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 per cet 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 per cent level - could be 4.6 per cent, 4.7 per cent 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,” Oliver was quoted as saying by Reuters.

Zhiwei Zhang, President and Chief Economict with Pinpoint Asset Management said, “China’s economic growth edged down in Q3 to 4.6 per cent from 4.7 per cent in Q2. While it is a marginal decline, it makes the official growth target of 5 per cent 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 US election is probably one factor that will influence the policy thinking in Beijing,” Zhang added.

With inputs from Reuters and AP.