- China’s Q3 GDP grows 4.8 per cent vs Q2’s 5.2 per cent, in line with forecast
- September data show weaker retail sales, stronger factory output
- Property downturn, trade tensions weigh on demand, confidence
- Investors look to fresh stimulus as growth slows
- Party meeting awaited for clues on efforts to rebalance economy
BEIJING, Oct 20 — China’s economic growth slowed to the weakest pace in a year in the third quarter, as a property crisis and trade tensions hurt demand, leaving policymakers with the daunting challenge of rebalancing GDP drivers towards greater consumption over time.
Authorities have unveiled modest stimulus measures this year, supported by resilient exports and strong stock markets, but renewed US-China trade tensions pose risks. While there is room for additional support, analysts are divided over whether policymakers will act this year.
Data today showed gross domestic product (GDP) grew 4.8 per cent in July-September, slowing from 5.2 per cent in the second quarter and in line with analysts’ expectations in a Reuters poll for a rise of 4.8 per cent.
China is aiming for full-year growth of around 5 per cent.
“The market understanding was that China is going to miss the target, no matter what. Even with stimulus, it was going to be below 5 per cent,” said Dan Wang, China director at Eurasia Group.
“But judging by the figure for the first three quarters, it’s going to hit the target, suggesting China can withstand any pressure from the US, even with such levels of tariff threats and export restrictions. Beijing is sending the signal that it is capable of reaching its development goals and is strongly committed to its policies.”
On a quarterly basis, GDP grew 1.1 per cent in the third quarter, the National Bureau of Statistics data showed, compared with a forecast 0.8 per cent increase and a revised 1.0 per cent gain in the previous quarter.
Trade rift highlight weakness in lopsided economy
Renewed trade tensions with Washington have highlighted the vulnerabilities of China’s lopsided economy, which relies heavily on manufacturing and overseas demand. This has raised expectations that Chinese leaders may embrace painful changes to rebalance growth towards domestic consumption.
While China’s export growth rebounded in September, much of the recent data show the world’s second-largest economy has lost momentum, and deflationary pressures have persisted despite efforts to curb overcapacity and fierce competition among firms.
Despite resilient headline figures, exporters are already feeling the impact of higher US tariffs imposed earlier this year, forcing many to diversify into new markets.
US President Donald Trump has threatened to raise tariffs on Chinese goods by an additional 100 per cent starting November 1. However, US officials have signalled that both countries were prepared to lower the temperature in their tariff spat.
China’s five-year plan in focus
Chinese leaders will hold a closed-door meeting from today through to Thursday to discuss, among other things, the country’s 15th five-year development plan, which is expected to prioritise high-tech manufacturing in the wake of the intensifying rivalry with the United States.
Investors are also looking to a Politburo meeting and the Central Economic Work Conference, expected in December, for clues on economic policy for next year.
“Q4 will be structurally different, heavy in investment and light in consumption. After all, negative investment growth is not something policymakers want to see,” said Tianchen Xu, senior economist at Economist Intelligence Unit in Beijing.
“Supportive measures rolled out since September like policy finance tools and the frontloaded government bond issuance are directed towards public investment projects.”
Separate September activity data, which were also released today, showed industrial output grew to a three-month high of 6.5 per cent year-on-year, accelerating from a 5.2 per cent increase in August and beating a forecast of 5.0 per cent.
Retail sales growth slowed to their weakest in 10 months at 3.0 per cent in September, from 3.4 per cent in August, matching a forecast rise of 3.0 per cent.
Fixed asset investment shrank 0.5 per cent in the first nine months compared with the same period last year, versus 0.5 per cent growth in the January-to-August period and an expected 0.1 per cent expansion.
Property investment in China fell 13.9 per cent in the first three quarters year-on-year, after dropping 12.9 per cent in the January-to-August period, official data showed today.
A prolonged property crisis has weighed heavily on growth and consumer confidence in China, with momentum already pressured by the US trade spat. — Reuters