According to government data released on Wednesday, China’s GDP contracted in the summer as worldwide demand for its exports weakened and the country’s already troubled real estate market worsened.
According to official figures, the second-largest economy in the world grew at an annual rate of 4.9% from July to September, exceeding analysts’ predictions of 4.5%. But compared to the 6.3% annual growth rate of the preceding quarter, that was significantly slower.
The National Bureau of Statistics warned that the world’s reality was getting “more complex and graver” and that the pandemic’s effects were still being felt in China’s consumer and business demand.
Although the results exceeded forecasts, according to Stephen Innes, managing partner at SPI Asset Management, China’s economy is “by no means out of the woods.”
In comparison to the 0.8% growth recorded in the quarter from April to June, the economy expanded by 1.3% on a quarterly basis in the third quarter.
Given that China was going through one of its most severe anti-virus shutdowns in April to June of 2022, which inflated the pace of growth in the previous quarter, the decline in growth also reflected base effects, according to research by Capital Economics’ Julian Evans-Pritchard.
Still, he pointed out that although there were signs of improvement, primarily driven by consumer spending, Capital Economics’ barometer of commercial activity showed growth decreasing in July–September.
China’s economy expanded 5.2% in the first nine months of this year compared to the same period last year, which suggests it is on course to meet Beijing’s aim of approximately 5% growth for 2023.
The Communist Party, which is currently in power, has made a conscious effort over the past ten years to move away from an economy that is primarily driven by government spending on large-scale infrastructure projects and toward one that is more like other developed countries.
The effort to achieve a more sustainable road to prosperity is reflected in the slowing economy, but the pandemic’s interruptions and a crackdown on excessive borrowing by real estate developers have highlighted underlying flaws.
The administration has taken the conventional strategy of increasing spending while announcing that it would prioritize renewable energy and other reforms in light of rising unemployment and severely slowing foreign investment. The third quarter figures, according to China analyst Louise Loo of Oxford Economics, indicated that a “stimulus-led cyclical pickup in China was underway.”
Retail sales increased 5.5% in September compared to the same month last year, above forecasts as shoppers splurged in anticipation of the Golden Week vacation, which began in early October.
In September, industrial output, which gauges activity in the manufacturing, mining, and utility sectors, increased 4.5% from the same month a year earlier.
In the first nine months of the year, compared to January-September 2022, fixed-asset investment, which refers to expenditure on manufacturing equipment, construction, and other
China’s trade data, which was made public earlier this week, revealed that imports and exports both fell this week but did so more slowly than before.
After nearly three years of “zero-COVID” restrictions were lifted late last year, people rushed to restaurants and retail centers, which helped the economy recover earlier this year. However, the rebound flattened earlier than anticipated.
The International Monetary Fund revised its growth projections for China this week, anticipating 5% GDP growth this year and 4.2% in 2024, a little decrease from its projections in July.
The IMF placed the blame for its negative revision on declining consumer confidence, sluggish global demand, and a real estate crisis that has severely affected company activity. According to Thomas Helbling, deputy director of the IMF’s Asia and Pacific Department, “the economy is currently very investment heavy.”
Beijing needs to promote more service sectors, create a better social safety net, and assure more equitable competition for state-owned and private firms, he said. Additionally, as China’s population ages, it is essential to invest in pension reforms, technology, and education.
There is a growth benefit if you implement those improvements, Helbling remarked.
Source: AP
