Economic recovery gains pace in October

China reported better-than-expected retail sales and industrial data for October, underscoring that the world's second-largest economy has been “running on abundant steam” to maintain the strong recovery momentum through the end of the year despite subdued global demand, geopolitical tensions and a slowing property sector. Chinese observers predict that the country's GDP growth could reach 5% or above in the fourth quarter, depending on how the CNY1 trillion special treasury bonds issuance could be executed in 2023 and 2024. In October, China's value-added industrial output increased by 4.6% year-on-year, beating market expectation of 4.3%, according to data released by the National Bureau of Statistics (NBS). The index is also higher than the 4.5% in September. Retail increased by 7.6% in October year-on-year, accelerating from September's 5.5% growth.

“China's economy has maintained an upward recovery momentum in the first ten months, laying a solid foundation for achieving the full-year social economic development target. Macro-economic policy effects, further linkage between improved demand and industrial production, and the steady progress of industrial upgrading, the economy is expected to continue to recover in the fourth quarter,” NBS Spokesperson Liu Aihua said at a press briefing of the State Council Information Office (SCIO).

The increase in domestic consumption was fueled by the travel boom in the eight-day “Golden Week” in late September and early October, a sustained spike in automobile purchases and shopping festivals in November and December, such as “Double 11” and “Double 12”. The Chinese economy will contribute 30% of the world economic growth, Cao Heping, Economist at Peking University, told the Global Times.

The South China Morning Post adds that real estate investment missed expectations and fell by 9.3% in the first 10 months of the year compared with a year earlier, contracting further from the 9.1% drop in the first three quarters. Analysts at Capital Economics said that “tentative signs of improvement in the property sector appear to have fizzled out”. The drag from the property sector intensified – with the weakness in the sector here to stay at least through 2024, added Oxford Economics. Fixed-asset investment (FAI) expanded by 2.9% in the first 10 months of the year, compared with the same period last year, but was down from the 3.1% growth in the first nine months of the year. The reading also fell to a 23-month low. Production of electric vehicles, batteries and renewables grew at double digit pace year-on-year, while pharmaceutical manufacturing, iron and steel manufacturing were among the sectors seeing annual declines. Yue Su, Principal Economist for China at The Economist Intelligence Unit (EIU), said October’s data confirmed that China’s economy continues to steadily recover, propelled by government-driven investment, a gradual stabilization of external demand, and sustained improvements in consumption.