China’s economy grew 4.8 percent in the third quarter of this year, outpacing consensus estimates despite lingering evidence of a prolonged real estate slump and waning trade with the US. Total retail spending rose 3.4 percent over the three-month period, helped in part by a 12.6 percent increase in household-related consumption. Fixed asset investments dropped 6.2 percent, while property sales contracted 9.6 percent.
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The latest batch of data comes as Beijing prepares to draft the country’s 15th Five-Year Plan this week. In a blueprint for China’s economic trajectory from 2026 to 2030, analysts anticipate sustained policy support for high-tech industries amid persistent trade tensions with the US. Earlier this month, Washington proposed additional levies of 100 percent on Chinese imports after Beijing tightened rules on rare earth exports, amplifying trade salvos just weeks before the APEC Summit takes place later this month in South Korea.
Despite mounting geopolitical headwinds between the world’s two largest economies, China’s exports grew 6.6 percent in the third quarter even as goods sent to the US dropped by 27.3 percent. Offsetting the reduction, shipments to the EU advanced 11.2 percent while sales to the ASEAN region climbed 18.2 percent, showing how effectively Beijing has diversified its trade routes.
Extra working days in September and new policy fund
The quarter’s data was partly driven by three extra working days in September when industrial production rose 6.7 percent, noted Morgan Stanley analysts. Besides the impact from the base effect, the investment bank also pointed to the slowdown in fixed asset investments and retail spending as evidence of waning fiscal stimulus initiatives such as the household consumption scheme.
Retail sales rose 3 percent in September, representing a slight dip from 3.4 percent in August. Fourth quarter consumption is off to a tepid start as October’s “golden week” turnover for key retail and restaurant enterprises came in just 2.7 percent higher than a year ago. Even with traffic and revenue in key business districts up 8.8 percent and 6 percent respectively, this remains a slight deceleration against the overall retail momentum.
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When the five-year plan is released in March next year, analysts expect a slew of announcements to spur consumption, building on household subsidies like the childcare subsidy approved back in July. Last Friday, the Ministry of Finance introduced a new policy-based financial instrument worth 500 billion yuan to support technological innovation. Unlike earlier tools focused on infrastructure, the new fund is expected to direct capital toward emerging digital sectors, helping meet the 5 percent growth target while lowering the likelihood of further stimulus this year, according to Morgan Stanley.
