China’s economy grew more than expected over the summer, although the real estate market continued to weaken as the government and the banks it controls poured money into infrastructure and new factories.
Data released on Wednesday showed economic output rose in the July-September period compared to the previous three months. Industrial production of everything from chemicals to electric cars increased as the government built more roads, sewers and other public works and state banks poured money into factory construction.
China’s economy, the world’s second-largest, has struggled over the past year and a half as property sales slowed and some of its biggest developers faced bankruptcy. The country’s debt burden, which has risen sharply over the past 15 years, continues to weigh on growth.
In the third quarter – from July to September – gross domestic product grew by 1.3 percent compared to the previous three months, China’s National Bureau of Statistics said. In the second quarter, the economy grew by 0.8 percent.
For the full year, third-quarter data suggests China’s economy grew about 5.3 percent, compared with an annual rate of just over 3 percent in the second quarter.
Consumer spending stalled in the spring but appears to have stabilized in recent months. Retail sales rose 5.5 percent in September from the same month last year, an acceleration from 4.6 percent in August.
“It seems tentative, but better than it was three months ago,” said Meg Rithmire, an associate professor at Harvard Business School who specializes in the Chinese economy.
Sheng Laiyun, deputy commissioner of the National Bureau of Statistics, said at a news conference that China’s economic performance so far this year has laid “a strong foundation” for further growth. However, he also warned that “the external environment is becoming more complex and serious, while domestic demand remains inadequate and the foundation for economic recovery and growth needs to be further consolidated.”
Consumers worried by the housing crisis were cautious about their spending.
The housing market remains at the center of the economy’s deeper problems: A two-year decline in house prices has left families feeling less wealthy and, as a result, less willing to spend money. Weak demand for goods and services has left the economy on the brink of deflation. Consumer prices remained unchanged in September from a year earlier, and wholesale prices charged by manufacturers actually fell, according to government data released Friday.
Falling housing prices have sparked a wave of bankruptcies among real estate developers and dampened the construction sector, once one of the country’s largest industries. The statistics office said on Wednesday that investment in real estate development fell 9.1 percent in the first nine months of this year compared to the same period last year, while investment in infrastructure and production capacity each increased by 6.2 percent.
According to the Beike Research Institute in Tianjin, average prices for existing properties in 100 Chinese cities have fallen by 16 percent since August 2021.
The government has tried to offset the slowdown.
Officials in Beijing have given local governments the green light to issue more bonds to finance infrastructure projects. The state-controlled banking system has provided loans to manufacturers so they can invest in more factories.
The aim was to create jobs in the hope that people would then spend more money. Youth unemployment has been very high this year and the government stopped publishing the data in August. But overall urban unemployment fell to 5 percent in September, from 5.2 percent in August and 5.3 percent in July.
The loan will initially help companies such as Dalian Bingshan Group, a large manufacturer of commercial heating and cooling systems in the city of Dalian. “In Bingshan, we receive a lot of government support – financial support, political support,” said Ji Zhijian, the group’s chairman.
China’s Supreme Leader Xi Jinping has cracked down on private sector companies in recent years in areas ranging from internet platforms to home tutoring. But he has shown signs of weakening in recent days as the economy continues to struggle, noting on Friday during a visit to Jiangxi province that he wanted to “promote the healthy development of the private sector.”
The pandemic casts a long shadow.
The key GDP figure reported by the government on Wednesday, comparing this summer with the same period last year, showed growth of 4.9 percent.
But a year ago, China’s economy was still struggling with “zero Covid” restrictions, which included municipal lockdowns, mass quarantines and strict travel restrictions between provinces.
“It’s not fair to compare today’s economy with the economy of a year ago when many in China were stuck in their homes, and that comparison also says little about where the economy is headed now,” said Diana Choyleva, Chief economist at Enodo Economics, a London-based research firm focused on China.
China’s factories are still busy.
Even as China’s growth has slowed, its factories continue to produce a flood of goods. And as domestic growth slows and consumers at home shy away from big purchases, China is tapping into big markets abroad.
China is flooding the world with exported cars, both electric and gasoline models.
A large part of the goods goes to Europe. Before the pandemic, China exported 2.7 containers of goods to Europe for every container it imported, according to shipping statistics. In recent months, China exported nearly four containers of goods for every container of imports.
But China’s export boom is causing political turmoil. European officials are concerned about the trade imbalance. And the European Union has already launched an anti-subsidy investigation into China’s fast-growing electric car exports that could lead to tariffs next summer.