China growth keeps rapid recovery on track to become the only major world economy to grow this year after consumer confidence recovered from a post-pandemic slump in the third quarter, although a lagging services sector meant a 4.9 per cent increase in gross domestic product missed market expectations.
Robust exports and higher than expected increases in industrial output and retail sales towards the end of the quarter provided further evidence that the world’s second-largest economy had rebounded from a health crisis now crippling many of its trading partners, the Financial Review reported.
Economists attributed this to the country’s handling of the pandemic, which shut down China’s factories in late January after the coronavirus was initially reported in central China before spreading around the world.
While China has so far avoided a second wave of infections, economists said risks remain.
“China is not free from the risk of a second wave of COVID-19, pent-up demand will likely lose some steam, medical product exports may have peaked, Beijing is determined to cool down property markets, some social distancing measures within China are likely to extend into the second half and rising US-China tensions could dent China’s exports and manufacturing investment,” Nomura chief China economist Ting Lu said.
China’s GDP rose 4.9 per cent year on year in the three months to the end of September, falling short of market forecasts as high as 5.5 per cent and economists’ consensus of 5.2 per cent.
Some economists attributed the miss to a lagging services sector, but others said high volatility made forecasting difficult.
The value of China’s currency had been rising on the expectation of solid data, while the country’s central bank said on Sunday it expected the economy to expand by 2 per cent this year.
Combined growth for the first three quarters of the year was 0.7 per cent, putting China back into growth after the coronavirus pandemic led to a 6.8 per cent decline in the first quarter.
While many economists question the accuracy of the Chinese government’s data, China has avoided the economic fallout being experienced by the rest of the world after controlling the outbreak early and avoiding a second wave of infections.
The International Monetary Fund last week doubled its growth forecast for the Chinese economy in 2020 to 1.9 per cent, compared with an expected 4.3 per cent fall for the United States.
Consumption, which initially lagged China’s pick-up in industrial output, is showing signs of recovering. Retail sales rose 3.3 per cent in September and 0.9 per cent for the third quarter.
In good news for Australian iron ore exports to China, crude steel production jumped 10.9 per cent year-on-year in September to 92.56 million tonnes. Crude steel production was 4.5 per cent higher in the first nine months of the year, to 781.59 million tonnes.
Industrial production increased 5.8 per cent in the third quarter. It was down 1.3 per cent for the first half. While many of China’s factories reopened in March and April, demand for exports slumped as China’s major trading partners went into coronavirus lockdowns.
Fixed-asset investment, which fell 3.1 per cent in the first half, was in positive territory for the first time since the outbreak, with combined growth of 0.8 per cent in the first three quarters.
The official urban surveyed unemployment rate was 5.4 per cent in September as the official data showed the government was closing in on its promise to create 9 million new jobs, according to the Financial Review.
China has avoided a second wave of coronavirus infections because of strict lockdowns and widespread testing. However, the economy faces new risks from rising hostilities with the United States and many of its major trading partners, including Australia.
China’s imports rose 13.2 per cent in US dollar terms in September, while exports rose 9.9 per cent from a year ago.
China’s President Xi Jinping has flagged a “dual circulation” economic strategy aimed at making the country less reliant on other countries.
This will be the centrepiece of a new five-year economic and social blueprint for the country expected to be endorsed by 200 of the country’s ruling elite at a meeting known as the Fifth Plenum, starting on October 26.
By Michael Smith