China’s economy will likely pick up pace in the fourth quarter following the announcement of bolder-than-expected stimulus measures, providing strong support for achieving its annual growth target of around 5% this year, the China Daily predicts, citing economists. As China grapples with lackluster domestic demand, economists suggest a multifaceted approach, balancing monetary easing with targeted fiscal stimulus to rejuvenate consumer confidence and boost domestic demand. They believe the focus must be on tackling issues faced by enterprises, spurring consumption and stabilizing the real estate sector, as that will be pivotal in steering the country toward a more resilient and sustainable economic future.
Wang Yiming, Vice Chairman of the China Center for International Economic Exchanges and former Deputy Director of the Development Research Center of the State Council, noted that while China’s economy has demonstrated resilience – with key indicators reflecting stability – weak domestic demand remains a fundamental issue. “China’s industrial output rose 5.8% year-on-year in the first eight months, slightly faster than in the same period over the past four years and higher than the 5% GDP growth rate for the first half of the year,” Wang said. “The rapid growth in industrial production is notably driven by exports, which saw a year-on-year increase of 4.6% in U.S. dollar terms in the first eight months, primarily due to a recovery in global trade demand.”
Meanwhile, the National Bureau of Statistics (NBS) has announced that China's foreign trade of goods went up by 5.3% year-on-year in the first nine months. The consumer price index (CPI) rose 0.4% year-on-year in September, compared with a 0.6% increase in August. The producer price index (PPI), which measures factory gate prices, dropped 2.8% last month, widening from a 1.8% fall in August.
Prior to the announcement, Wang warned that export growth is likely to decelerate in the fourth quarter amid slowing global trade and increasing trade restrictions, which may lead to a slowdown in industrial production and manufacturing investment and further exacerbate pressures from lackluster demand. “The broader economy is still facing pressing challenges and difficulties, with supply recovering more rapidly than demand, and external demand outperforming domestic demand,” he said. Given China’s current low price levels, Wang said he expects the annual CPI increase will be significantly lower than the preset growth target of around 3%, and the PPI will continue its negative growth.
In response to the pressing challenges, a recent meeting of the Political Bureau of the Communist Party of China (CPC) called for stabilizing the real estate market and strengthening fiscal and monetary policy support. Wang suggested that the government should increase fiscal deficits or issue special treasury bonds, in a bid to alleviate local government debt pressures, as many local authorities faced increased financial burdens due to heightened public health expenditures during the Covid-19 pandemic. Wang emphasized that increasing funding can enable local governments to make overdue payments owed to businesses, which will help boost market confidence, spur corporate investment and stimulate domestic demand. Looking ahead, he also called for forceful fiscal stimulus to boost investment in urban renewal and spur consumption. China has already pledged solid efforts to boost domestic demand, as the government allocated CNY150 billion in ultra-long-term special treasury bonds in August to support trade-in deals for consumer goods.
“The push for driving trade-in deals for consumer goods has effectively stimulated consumption potential, directly driving rapid sales growth of key consumer goods, including cars, home appliances and home furnishings,” said Wen Hua, Deputy Director General of the Department of Resource Conservation and Environmental Protection at the National Development and Reform Commission (NDRC). The policy measures also effectively boosted investment and profitability in related industries, further enhancing the development of relevant enterprises, Wen added.
In fact, the country’s accelerated push for promoting trade-in deals for products is paying off, with significant growth seen in consumer spending on key consumer goods, providing a solid base for continued economic recovery in the following months, experts said. From September 1 to 22, sales of passenger cars grew 10% month-on-month, while sales of new energy vehicles (NEVs) rose 7% on a monthly basis, said the China Automobile Dealers Association. NDRC data showed investment in consumer goods manufacturing rose 14.9% year-on-year in the first eight months, while output increased by 4.2% year-on-year in August. Despite facing challenges, China’s economy will continue to recover with a series of stimulus policies taking effect gradually, said Huang Hanquan, Dean of the Chinese Academy of Macro-economic Research, as reported by the China Daily.
