China's Economic Growth in Q3 2023

(Reuters) – China's economy grew at the slowest pace since early 2023 in the third quarter. Though consumption and industrial output figures for last month beat forecasts, a tumbling property sector remains a significant challenge for Beijing as it tries to boost growth.

Data released on Friday showed the world's second-largest economy grew 4.6% year-on-year in July-September, beating a 4.5% forecast in a Reuters poll but slowing from 4.7% in the second quarter.

Key Points

• Q3 GDP: +4.6% y/y (forecast +4.5%, Q2 +4.7%)
• Q3 GDP: +0.9% q/q (forecast +1.0%, Q2 +0.5% revised)
• Sept Industrial Output: +5.4% y/y (forecast +4.5%, Aug +4.5%)
• Sept Retail Sales: +3.2% y/y (forecast +2.5%, Aug +2.1%)
• Jan-Sept Fixed Asset Investment: +3.4% y/y (forecast +3.3%, Jan-Aug +3.4%)
• Jan-Sept Property Investment: -10.1% y/y (Jan-Aug -10.2%)

Market Reaction

The blue-chip CSI300 Index was down 0.4%, while the Shanghai Composite Index eased 0.33% in early trade after the data.

Commentary

WOEI CHEN HO, Economist, UOB, Singapore

"The overall tone is actually not bad, given that the nominal GDP itself has also stabilized. I think the pace of growth is similar to what we saw in the second quarter. So, the market is actually taking this in stride. The focus is on what the government is going to do next in terms of the size of the fiscal stimulus."

BENSON WU, China and Korea Economist, BofA Global Research, Hong Kong

"The recent coordinated easing and better policy communication is a good starting point. We currently expect the annual GDP growth at 4.8% this year and could be reaching the lower bound of the 'around 5%' target. The growth for the coming year will largely depend on the fiscal package that is yet to be announced."

TORU NISHIHAMA, Chief Economist, Dai-ichi Life Research Institute, Tokyo

"The GDP data confirmed that China faces excess supply and lack of demand. China is seen falling into a fully-fledged deflation, and such a situation is deepening. Chinese authorities are missing the mark — they are not addressing structural problems effectively."

ALVIN TAN, Head of Asia FX Strategy, RBC Capital Markets, Singapore

"In a general sense, this is very backward-looking data. The big development since then is the overall stimulus that was delivered at the end of September. While the data indicates growth has decelerated, there's hope for future improvement with stimulus."

SHANE OLIVER, Chief Economist, AMP, Sydney

"I doubt these numbers are affected by September's stimulus. Retail sales are still fairly subdued, indicating continued slow growth. The absence of significant stimulus might keep growth below the 5% target."

ZHIWEI ZHANG, President and Chief Economist, Pinpoint Asset Management

"China's economic growth edged down in Q3 to 4.6% from 4.7% in Q2. Continued declines may hinder achieving the official 5% growth target. We anticipate more clarity on fiscal stimulus in November."

Background

• China has struggled to mount a strong and sustainable post-COVID economic recovery, impacted by a protracted property downturn and high local government debt.
• The world's second-largest economy is expected to expand 4.8% in 2024, below the government's target of about 5%.
• Authorities have introduced significant policy stimulus since late September, but analysts insist more is needed to stabilize growth.
• The central bank announced its most considerable stimulus since the pandemic, aiming to combat deflation. Investors await a clearer fiscal policy in the rubber-stamp legislature's upcoming meeting.