China economy growth tops forecasts in third quarter

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China economy growth tops forecasts

Highlights

China's GDP grows 4.5% year-on-year in Q3 2024, surpassing 4.4% forecasts and exceeding the previous quarter's 4.3%.
Retail sales rise 1.1% and industrial output increases 5.5% in September, while fixed-asset investment falls 7.2% year-to-date, indicating a mixed domestic picture.
China's trade surplus widens in September as exports surge, but trade tensions with the EU and domestic demand weakness pose risks to growth momentum.

Third-quarter data beats forecasts

As reported by Reuters, citing the National Bureau of Statistics, China's gross domestic product grows 4.5% year-on-year in the third quarter, above the 4.4% forecast in a Reuters poll and faster than the 4.3% pace in April to June.

On a quarterly basis, the economy expands 1.2% in the third quarter, ahead of expectations for a 1.1% rise and accelerating from 0.9% in the previous quarter. For January to September, growth reaches 4.6%, keeping the economy within the government's annual target range of 4.5% to 5.0%.

Other indicators show a mixed picture. Retail sales rise 1.1% in September, improving from 0.4% in August and beating expectations for 0.6% growth, while industrial output increases 5.5%, up from 5.2% and in line with forecasts. At the same time, fixed-asset investment falls 7.2% in the first nine months, unchanged from the January to August decline, infrastructure investment shrinks 4.2%, and property investment drops 20.6% over the same period.

Export support offsets domestic weakness

Beijing relies heavily on exports for growth this year, but that support faces mounting risks as domestic demand remains soft and trade tensions with the European Union intensify. China's push to redirect credit and resources away from property and toward high-tech industries is also producing a two-speed economy, with strong factory output and exports contrasting with weak consumption and private investment.

China's trade surplus widens more than expected in September as exports surge, keeping the country on track to exceed last year's record surplus of $1.2 trillion. However, a deal with the EU to curb Chinese hybrid-vehicle shipments could weigh on the fast-growing auto trade and add pressure to a key export channel.

Policymakers recently expand support for home buyers, roll out measures to channel cheaper credit into infrastructure and technology, and allocate 550 billion yuan in unused government debt quotas to ease local governments' financial strain and boost infrastructure spending. Authorities also step up fiscal support through wider loan interest subsidies for small private firms and consumers, while using an 800 billion yuan policy-based financing tool to encourage infrastructure investment.

Even so, officials refrain from launching large-scale stimulus, as strong goods exports, helped by a global AI-driven technology boom, are expected to support the economy's path toward its annual growth goal.

In our earlier article on expectations for China’s third-quarter GDP growth, we covered forecasts for a modest pickup supported by late-September policy easing, including targeted rate cuts, mortgage subsidies, and the use of 550 billion yuan in unused debt quotas. We also noted that strong exports and factory output were expected to offset weak consumption, private investment, and ongoing property-sector stress, keeping growth near the lower end of Beijing’s annual target range.

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