China‘s economy experienced its slowest growth since early 2023 in the third quarter. While consumption and factory output figures exceeded expectations last month, the struggling property sector remains a significant challenge for Beijing as it strives to revive growth. Policy stimulus has been significantly increased since late September, but markets are eagerly awaiting more details on the size of the package and a clearer roadmap to ensure long-term stability.
Official data revealed that the world’s second-largest economy grew by 4.6 percent in July-September, slightly surpassing the forecasted 4.5 percent in a Reuters poll but falling short of the 4.7 percent pace recorded in Q2. Bruce Pang, Chief Economist at JLL, commented that China’s Q3 data aligns with market expectations due to weak domestic demand, an ongoing struggle in the housing market, and slowing export growth.
During a post-data press conference on Friday, officials expressed confidence that China can achieve its full-year growth target of around 5 percent through further policy support and another reduction in banks’ reserve requirements. Sheng Laiyun, deputy head of China’s statistics bureau stated that based on their comprehensive assessment, they expect stabilization and recovery trends to continue into Q4.
While industrial output and retail sales data for September surpassed forecasts providing some comfort to policymakers, weaknesses persist within the property sector. Betty Wang from Oxford Economics emphasized that despite recently announced stimulus measures potentially mitigating downside risks for next year’s growth prospects; they are unlikely to reverse structural downturns.
With real estate accounting for 70 percent of Chinese household wealth at its peak contributing a quarter of the economy consumers have tightened their spending habits significantly. This has negatively impacted businesses like EssilorLuxottica (makers of Rayban and Oakley brands), which reported missing revenue expectations due to weak consumer demand in China.
Furthermore, despite multiple rounds of policy support measures over the past year aimed at reviving it; there are few signs indicating a revival within the property market as new home prices fell at their fastest pace since May 2015 according to separate data released on Friday.
Additionally concerning is China’s crude steel output declining for four consecutive months in September while export shipment growth sharply slowed down last month—a worrying sign considering exports have been one bright spot within an otherwise challenging economic landscape.
Policymakers have pledged to shift focus towards stimulating consumption instead of relying heavily on infrastructure and manufacturing investment as drivers of economic growth. The central bank announced aggressive monetary support measures late last month targeting both property and stock markets; however investors await specific details regarding overall package size and plans for reigniting broader economic expansion.
China observers have repeatedly emphasized addressing longer-term structural challenges such as overcapacity issues high debt levels aging population alongside implementing short-term stimulus measures.