China’s economy grew by 4.5 percent year-on-year in the third quarter. The growth rate thus accelerated from 4.3 percent in the previous quarter and exceeded analysts’ expectations. The economy was supported by strong exports, but Chinese consumers remain cautious in their spending. This is according to data released today by the Chinese statistical office.
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China’s Economy Revived in the Third Quarter
Analysts polled by Reuters expected gross domestic product (GDP) to grow by 4.4 percent in the third quarter after weak growth in the previous quarter. The second-quarter result was the weakest since the fourth quarter of 2022, when China curbed its economy due to the COVID-19 pandemic. Compared to the previous quarter, GDP increased by 1.2 percent after a 0.9 percent rise in the second quarter. Analysts had expected an increase of 1.1 percent.
The result brought China’s economy closer to meeting its official annual growth target, at a time when its trading partners feel an increasingly urgent need to balance trade deficits. According to analysts, Beijing could achieve its full-year target, which anticipates growth in the range of 4.5 percent to five percent, without resorting to further stimulus measures, partly due to recent modest fiscal and monetary support. Last year, the Chinese economy grew by five percent.
However, ITC Markets analyst Andy Ji warned that the composition of growth remains deeply unbalanced. “Growth is driven by exports and the state. Domestic demand is not yet self-sustaining, and the real estate sector shows no signs of bottoming out,” he added. Société Générale economist Michelle Lam added that without a decisive policy shift towards supporting household incomes and consumption, China is likely to remain trapped in a prolonged period of low inflation and sub-par growth.
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Yuan Rises, Exports Break Records: What’s Driving Chinese Markets Up?
In response to the report, which eased pressure on policymakers to implement more aggressive stimulus measures, the Chinese yuan strengthened against the dollar to its highest level since July 2022. Stocks also rose. Domestic demand in China weakened. This was due to a prolonged slowdown in the real estate market, which reduced household wealth and prompted residents to save more. Nevertheless, thanks to strong exports, which represent one of the few positive factors, China is on track to surpass last year’s record trade surplus of 1.2 trillion dollars, according to the AP.
Last month, Chinese exports rose by 36 percent, and the country already achieved a surplus of 938 billion dollars from January to September. Many of China‘s trading partners are concerned that their domestic industries and economies are increasingly threatened by the influx of cheaper Chinese goods. Mao Shengyong, a representative of the statistical office, stated that the Chinese economy grew by 4.6 percent over nine months. He described this growth as “hard-won” and admitted to uneven and insufficient development. Top-tier manufacturing, the digital economy, and modern services contributed over 40 percent to the growth since the beginning of this year.
However, Max Zenglein, Chief Economist for Asia and the Pacific at the Conference Board, also warned that the official aggregate growth figure is becoming an increasingly less reliable indicator of how the economy as a whole is performing. The reason is that this figure obscures growing disparities between sectors, regions, and households. Beijing faces difficult trade-offs, and resolving domestic imbalances may prove more challenging than managing external pressures, he added.
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Source: ČTK
