China’s economy powered ahead in the third quarter, data showed Monday, building on a strong recovery from painful coronavirus lockdowns, while the country’s crucial army of consumers picked up their spending last month as they grow more confident.
However, the expansion fell short of forecasts and officials warned of uncertainty as the disease continues to ravage other key markets, with the National Bureau of Statistics saying “the international environment is still complicated”.
Having essentially shut down major cities around the country to fight the virus, China’s economy saw an unprecedented contraction in the first three months of the year but with new infection rates being brought under control it has seen a strong recovery over the past six months.
That has put it on track to be the only major economy likely to expand this year, the International Monetary Fund said.
The 4.9 per cent growth in July-September followed a 3.2 per cent rate in the previous three months and is close to pre-pandemic levels.
The reading was helped by a forecast-beating 3.3 per cent jump in retail sales last month, suggesting China’s army of consumers are returning to shops and restaurants, and travelling again.
Industrial output also beat expectations, jumping 6.9 per cent on-year in September.
China’s communist leadership has hailed its handling of the virus, giving experimental vaccines to hundreds of thousands of people as it seeks to reframe the pandemic’s origin story.
But long-term fears over jobs and a potential virus rebound in China are weighing on consumer sentiment, despite government attempts to reignite domestic demand.
– Consumer caution –
“China built its quick recovery via stringent lockdowns, massive testing, population tracking and fiscal stimulus,” Nomura chief China economist Lu Ting said.
Other factors such as export growth and a surge in demand after massive floods in the summer also boosted activity in September, he added.
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But “China is not absolutely free from the risk of a second wave of Covid-19, pent-up demand will likely lose some steam… and rising US-China tensions could dent China’s exports and manufacturing investment”, Lu said.
OCBC Bank’s head of Greater China research Tommy Xie told AFP that retail figures showed a positive trend, suggesting “rising interest in big-ticket items”, with car sales a key driver of the spending rebound.
“But it will take some time for us to access how sustainable this domestic demand is,” he cautioned, citing that tourism revenues from domestic trips were still down by about 30 per cent on-year in the early-October Golden Week period.
“That will also be particularly important for the upcoming growth, given China is now promoting a… strategy where domestic demand becomes increasingly important,” he said, referring to China’s push to make consumers the key driver of economic growth.
National Bureau of Statistics spokeswoman Liu Aihua said Monday that although China’s economy has continued its steady recovery, the global picture is murky “with considerable instabilities and uncertainties”.
She highlighted “great pressure” in forestalling virus cases from abroad and preventing a virus resurgence at home.
In September, China’s urban unemployment rate dipped further to 5.4 per cent, although fixed-asset investment growth turned positive for the first time in 2020.