China saw moderate third-quarter growth as hurdles persist: Survey

Last Updated on October 16, 2023 2:01 pm

China’s economy is expected to have seen moderate growth in the third quarter, according to an AFP survey ahead of data this week, while experts warn that there were still significant hurdles for its recovery.

Authorities have been seeking ways to reinvigorate activity in an economy grappling with a major property crisis and weaker consumption since Beijing abolished its strict zero-Covid policy last year.

Analysts polled by AFP saw an average 4.3 percent on-year growth in gross domestic product in July-September, falling short of more ambitious projections of a sustained recovery.

“Troubles in the property sector have spilled over into wider consumer activity and translated into consumers still spending a smaller share of their income relative to pre-Covid,” Capital Economics’ Sheana Yue said.

Beijing has set a goal of around five percent growth for 2023 — one of its lowest targets in years following decades of breakneck expansion.

And that goal “is not a strong number considering last year’s low base”, Gene Ma of the Institute of International Finance said. “The main challenge is still housing.”

While real estate was once a driving force for the world’s number two economy, many developers are now fighting for survival — exacerbating a crisis of confidence among potential buyers.

“Given the large stock of empty homes, ageing population, and the end of speculation fever, we expect home sales to remain subdued for years to come,” said Ma.

The newest quarterly figures are due to be released on Wednesday, the same day that a slew of world leaders including Russian President Vladimir Putin arrive in Beijing for a summit on China’s Belt and Road — potentially meaning they could be delayed.

Authorities last year postponed the release of third-quarter figures ahead of a major political conference, without providing a reason.

Experts say China is on track to reach its modest goal for the year, with AFP’s survey of analysts forecasting annual growth of 4.92 percent.

But last quarter’s results missed expectations following a rapid resumption in activity in the first three months of this year.

The economy grew 6.3 percent in the second quarter, much weaker than the 7.1 percent predicted in a survey of analysts by AFP.

“Households and businesses are ever-so-slowly gaining some confidence,” said economist Harry Murphy Cruise of Moody’s, adding that the country’s growth for the entire year is on pace to “sneak into the bottom” of official targets.

‘Sluggish’ demand

Exports, another traditional engine for growth, have also flagged this year.

As many major economies face the prospect of rising inflation, consumers around the world are buying fewer Chinese products.

“Sluggish external demand will continue to weigh heavily on (China’s) exports and manufacturing activity,” said Brian Coulton, chief economist at Fitch Ratings.

In the face of growing challenges, authorities are coming under pressure to step in with stimulus, but other than a few small interest rate cuts and pledges of action, there has been little of substance out of Beijing.

Authorities have so far been “hesitant to come with the needed ‘big bazooka’ stimulus”, said Robobank’s Teeuwe Mevissen.

But help could be on the way.

“According to some sources, Beijing is considering… 1 trillion yuan ($137.0 billion) in stimulus during the last quarter of this year,” said Mevissen.

And Jing Liu, Greater China chief economist at HSBC Global Research, said that while the country is “now facing both cyclical and structural headwinds”, it is starting to see signs of recovery in consumption demand and property sales in major cities.

“In the upcoming quarters, we expect the government to focus more on structural reforms, such as supporting consumption-led growth, as well as fostering new growth drivers in manufacturing upgrading and green development,” said Liu.

China’s economy expanded 3.0 percent in 2022, well short of the official target of 5.5 percent, and one of the lowest rates in four decades, owing to the impact of strict Covid containment measures.