China’s third-quarter GDP growth beats expectations, but risks loom

BEIJING, Oct 24 (Reuters) – China’s economy rebounded at a faster-than-expected pace in the third quarter, but tight COVID-related restrictions, a protracted housing crisis and global recession risks are challenging Beijing’s efforts to foster a robust recovery over the next year. .

Helped by government measures to revive activity, the gross domestic product (GDP) of the world’s second-largest economy rose 3.9% in the July-September quarter year on year, official data showed on Monday. above the 3.4% pace predicted in a Reuters poll and accelerating from the 0.4% pace in the second quarter.

But weak domestic demand and slowing exports point to a bumpy recovery as China looks set to continue its current zero-COVID strategy after the country completed its two-decade leadership reshuffle on Sunday, with Xi Jinping securing a third term as General Secretary of the ruling Communist Party.

Hong Kong stocks fell and Chinese stocks fell on Monday, as the yuan weakened, after the new composition of China’s top governing body heightened investor fears that Xi was doubling down on ideological policies to the detriment of economic growth.

On a quarterly basis, GDP rose 3.9% in the third quarter, compared to a revised decline of 2.7% in April-June and an expected rise of 3.5%.

The data was originally due to be released on October 18, but was delayed during the main Communist Party congress last week.

“The Chinese economy has great resilience, great potential and great latitude,” Xi told reporters on Sunday as he unveiled the Communist Party’s top leadership team for the next five years.

“Its strong fundamentals will not change, and it will remain on a positive long-term trajectory.”

The economy was buoyed by the manufacturing sector, with separate data showing industrial production in September rose 6.3% from a year earlier, beating expectations of a 4.5% gain and 4.2% in August.

Despite the rebound, the economy faces challenges on several fronts at home and abroad. China’s pandemic curbs and strife in its key real estate sector have exacerbated external pressure from the Ukraine crisis and a global slowdown driven by interest rate hikes to rein in runaway inflation.

A Reuters poll predicted China’s growth would slow to 3.2% in 2022, well below the official target of around 5.5%, marking one of the worst performances in nearly half a century. .

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In signs of continued strain, exports rose 5.7% from a year earlier in September, beating expectations but registering the slowest pace since April. Imports rose a weak 0.3%, below estimates for growth of 1.0%.

Retail sales rose 2.5%, missing expectations of a 3.3% increase and slowing from August’s 5.4% pace, underscoring still fragile domestic demand.

In particular, restaurant sales fell 1.7% in September from an 8.4% gain in August due to stricter COVID control measures.

The surveyed urban unemployment rate reached 5.5% in September, the highest since June, with the unemployment rate for job seekers aged 16 to 24 at 17.9%.

More importantly, month-over-month new home prices fell for the second consecutive month in September, reflecting continued buyer aversion in the economically vital sector as debt-ridden developers rushed to pool their resources and deliver projects on time.

“This dataset sends an important message that even COVID measures have become more flexible as it depends on the number of COVID cases, lockdowns are still a big uncertainty for the economy with the backdrop of the housing crisis,” said Iris Pang, chief economist for China at ING.

“This uncertainty means that the effectiveness of pro-growth policy would be compromised.”

Policymakers have rolled out more than 50 economic support measures since late May, seeking to bolster the economy to ease pressures on jobs, even as they downplayed the importance of hitting the growth target, which was fixed in March.

New bank lending in China nearly doubled in September from the previous month and far exceeded expectations, helped by the central bank’s efforts to revive the economy.

“On the policy front, the overall policy will remain favorable,” said Hao Zhou, chief economist at Guotai Junan International.

“In our view, new political momentum is needed to support the economic recovery, but further interest rate cuts are unlikely during a period of aggressive rate hikes by global central banks.”

Reporting by Ryan Woo and Ellen Zhang; Editing by Sam Holmes and Jacqueline Wong

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