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Hong Kong CNN –
China’s economy regained momentum in the third quarter, with gross domestic product (GDP) growing 4.9% year-on-year, the National Bureau of Statistics (NBS) said on Wednesday.
That was above a Portal poll of analysts’ estimate of 4.4% and puts Beijing’s annual growth target within reach. In the first nine months of 2023, the economy grew 5.2% year-on-year.
“The growth goal of [around] 5% is expected to be achieved,” Zhiwei Zhang, president and chief economist of Pinpoint Asset Management in Hong Kong, said in a research note.
On a quarterly basis, the economy grew by 1.3% in the July to September period. That was faster than the 0.8% quarter-on-quarter growth recorded in the three months to June.
According to NBS data, consumer spending emerged as one of the brightest spots in the July-September period.
Still, the all-important real estate sector remains a drag. According to NBS, real estate investment fell 9.1% in the first nine months of 2023 compared to the same period last year.
The real estate market, which accounts for up to 30% of the economy, plunged into crisis more than two years ago after the government cracked down on developers’ borrowing. The downturn is likely to drag on and pose a major threat to China’s growth prospects over the next three to five years.
The world’s second-largest economy had a solid start to the year after emerging from three years of Covid restrictions. But the recovery fizzled out in April-June due to weak consumer spending, a continued housing slump and subdued global demand for manufactured goods.
Beijing has stepped up efforts to revive growth, including cutting interest rates, lifting restrictions on home and car purchases, accelerating infrastructure projects and easing capital controls to attract foreign investment.
“There are enough positive signs in recent data to suggest the economy has turned the corner,” analysts at Capital Economics said in a research note on Wednesday.
“This partly reflects the recent strengthening of policy support, which is expected to continue in the coming months,” they added.
Other data released by NBS on Wednesday suggested further signs of stabilization.
Consumer spending is on a solid foundation. Retail sales rose 5.5% in September, the strongest pace of growth in four months.
Spending on festive-related goods and services rose last month ahead of the extended Golden Week holiday, which stretched over eight days until October 6.
Tobacco and alcohol sales rose 23% in September compared to a year earlier, the largest increase among all spending segments. This was followed by catering services and sports and entertainment products, which recorded growth of 12.8% and 10.7%, respectively.
Industrial production rose 4.5% year-on-year in September, matching August’s growth.
Investment in fixed assets such as roads and airports rose 3.1% in the first nine months of the year. In the private sector, investment fell by 0.6%, while government sector investment increased by 7.2%. Infrastructure investments in particular accelerated.
Unemployment fell surprisingly.
The urban unemployment rate, which measures unemployment in cities and towns, fell to 5% in September from 5.2% in August. It marks the lowest level since November 2021.
However, no data was provided on youth unemployment, which hit a record 21.3% in June before data publication was suspended.
“Despite high youth unemployment, labor market resilience has likely helped drive down consumer spending,” Capital Economics analysts said.
Not surprisingly, the real estate sector is still shrinking.
New construction starts, measured in terms of living space, fell by 23.4% year-on-year in September, after a 24.4% decline in the first eight months.
Fresh housing construction is now at its lowest level since 2005, suggesting that “developers remain cautious,” analysts at Capital Economics said.
On Thursday, the NBS will release an official property price survey.
“The economic recovery is still in its infancy,” said Harry Murphy Cruise, an economist at Moody’s Analytics.
“And with the property market deterioration showing no signs of slowing, a black cloud hangs over us. “
Based on Wednesday’s data, Cruise expects China’s economy to grow 5% in 2023, slightly above the company’s previous estimate of 4.9%.
Earlier this month, the World Bank stuck to its forecast that China’s GDP will grow by 5.1% in 2023. However, it cut its 2024 forecast to 4.4% from 4.8%, citing ongoing difficulties such as high debt, housing weakness and an aging population.