China posted better-than-expected economic data in August, as the world's second-largest economy continues to recover, after policymakers took a series of vigorous but targeted measures to tackle challenges and downward pressure. The strong data showed that the Chinese economy may have passed the worst phase in the recovery process and reached a turning point, and offered further proof that the “China collapse” claim hyped by Western officials and media is absurd, analysts said. Better-than-expected growth in industrial output and retail sales, among others, also gave renewed confidence that the Chinese economy is well on track to meet its annual growth target, analysts said. But supportive policies still need to be effectively implemented to shore up the economy, which faces a complex international situation and sluggish global demand, they noted.
China's value-added industrial output increased by 4.5% year-on-year in August, higher than a reading of 3.7% in July, and retail sales grew by 4.6%, accelerating from July's 2.5% growth, according to data released by the National Bureau of Statistics (NBS). Both sets of data showed a quickened pace of growth from the June-July period. The data beat the predictions from a Reuters poll of economists, which forecast a 3.9% growth for industrial output and a 3% growth for retail sales. They were also higher than forecasts made by Chinese financial news site Yicai, which forecast a 4.03% growth for industrial output and a 3.95% growth for retail sales. NBS data also showed that China's surveyed urban unemployment rate dropped by 0.1 percentage point from July to 5.2% in August.
China's retail sales beat expectations in August thanks to a bustling summer travel peak and consumption-boosting measures. Retail sales of consumer goods in August recorded a year-on-year growth of 4.6% to CNY3.79 trillion, 2.1 percentage points higher than the growth rate in the previous month. Retail sales in the first eight months of the year reached CNY30.23 trillion, up 7% on a yearly basis. There were several highlights for consumption in August, including a 12.4% growth in total revenue for the catering sector. Fourth quarter retail sales could see a 6% growth or more, and annual consumption could contribute up to 70% to economic growth this year, one economist said.
In the first eight months of 2023, retail sales of services increased by 19.4%, strongly boosted by a surge in demand for traveling and catering amid the just-concluded summer holiday peak. A total of 1.84 billion domestic trips were made from June to August this year, with domestic tourism revenue reaching CNY1.21 trillion. Meanwhile, China's total box office soared to CNY20.62 billion during the summer season, setting a new record for the country's summer box office sales.
Zhou Maohua, Economist at Everbright Bank, told the Global Times that the economic indicators exceeded expectations in an all-round manner in August, reflecting that the momentum has improved significantly. Faster growth in industrial output and retail sales, rising investment in manufacturing, and a narrowing decline of real estate investment brightened the data set, Zhou said. “Considering economic data and trends in July and August, GDP growth in the third quarter is expected to reach 5% or even higher,” Zhou added.
In late July, Chinese policymakers issued 20 measures to boost domestic consumption, including support for expanding real estate and auto sales. A total of 24 measures were also released in August to boost foreign investment. On September 14, the People's Bank of China (PBOC) announced that it would cut the reserve requirement ratio (RRR) by 25 basis points effective on September 15, injecting more than CNY500 billion in medium- and long-term liquidity into the economy. Zhou said the lowering of RRR, which landed earlier than the market expected, showed policymakers' intention to front-load supportive policies to foster recovery and ramp up market confidence ahead of the Golden Week in October. Cao Heping, Economist at Peking University, predicted that third quarter GDP will reach a 5.8% annual growth rate and the fourth quarter may see 6% growth in GDP, the China Daily and Global Times report.