China’s economy expanded 4.9 per cent year-on-year in the third quarter as industrial growth continues to power the country’s recovery from the coronavirus pandemic.
The expansion in gross domestic product missed expectations but was still well ahead of a 3.2 per cent increase in the second quarter and represented a sharp turnround from a historic decline at the start of the year.
The recovery in the world’s second-largest economy, which has been stoked by a state-backed industrial boom, now shows signs of extending to consumption at a time when global growth remains under severe pressure.
Industrial production in China leapt by 6.9 per cent in September — its highest level this year and the same rate as in December before the coronavirus outbreak.
China is likely to be the sole major economy in the world to register positive growth this year
Retail sales, which lagged behind the wider recovery, also recorded their best performance this year, beating expectations to rise 3.3 per cent last month. In August, retail sales had added 0.5 per cent after seven straight months of decline.
Chaoping Zhu, global market strategist at JPMorgan Asset Management, said “domestic economic activities are expected to further normalise in the upcoming quarters”.
“When consumers’ confidence improves, consumption might take over investment to become the major contributor to domestic demand,” he added.
China has benefited from its containment of the pandemic, with new recorded cases remaining low over recent months as other big economies continue to grapple with new waves of infections.
The latest GDP data means the country’s rate of growth is moving towards the 6 per cent rate China recorded in the third quarter last year, before the pandemic.
“China is likely to be the sole major economy in the world to register positive growth this year,” said Eswar Prasad, a China finance expert at Cornell University.
“Short-term growth appears reasonably secure . . . The challenge now is to rebuild business and consumer confidence to revive private investment and maintain strong household consumption growth.”
The IMF expects global growth to be negative this year and the worst since the Great Depression in the 1930s. Economists have warned that Europe could face a double-dip recession as the region faces a sharp uptick in cases.
China’s industrial growth and a rise in construction has generated huge appetite for commodities in China, which imported more goods than in any month on record in September. Property investment has grown 5.6 per cent year-to-date.
Exports have risen for each of the past four months, adding 10 per cent last month, their fastest increase in 2020.
“Despite the global second waves and still contracting global demand, it looks like Chinese exports have been outperforming . . . if anything China is probably still taking market share from others,” said Hongbin Qu, co-head of Asia economic research at HSBC. He also pointed to signs of private consumption “gradually catching up”.
While stock and property markets have boomed through the recovery, consumers have remained cautious because of uncertainty over the longer-term impact of the pandemic. The unemployment rate was 5.4 per cent.
The country’s strong economic performance has helped boost international demand for its assets, with the renminbi rallying by 3.8 per cent this year.
China’s CSI 300 of Shanghai- and Shenzhen-listed shares reversed earlier gains to edge down 0.3 per cent around midday trading.
China’s onshore-traded renminbi weakened slightly to 6.7011 per dollar, but still traded close to an 18-month high.
Additional reporting by Daniel Shane in Hong Kong and Tom Mitchell in Singapore