China’s economy grew stronger than expected in the third quarter, data showed Wednesday, but the figure remains below target and officials continue to face calls for more stimulus while struggling to contain an unprecedented real estate crisis.
The 4.9% expansion in July-September was helped by better-than-expected retail sales figures and follows a string of generally positive figures that point to a period of stability after months of weakness despite the lifting strict zero Covid measures.
But the authorities remain under tension in the face of turbulence in the real estate sector, which has long represented a quarter of the country’s gross domestic product, supports thousands of businesses and constitutes a major source of jobs.
The sector has seen meteoric growth for decades, but the recent woes of key developers including Evergrande and Country Garden are now fueling buyer wariness as homes remain unfinished and prices fall.
Country Garden, one of China’s largest real estate companies and long considered financially strong, last month failed to repay interest on a loan totaling $15.4 million.
The group benefits from a 30-day grace period which expires on Wednesday and risks default if it does not honor the reimbursement.
The country faced “a serious and complex international environment and difficult tasks in promoting reform, development and domestic stability” in the first three quarters of 2023, the State Bureau of Statistics said on Wednesday.
Authorities have stepped up incentives for property purchases in recent months to revitalize the sector, but buyers remain cautious.
Households are monitoring their spending amid sluggish growth, which has hurt consumption this year, although the week-long national holiday in October helped boost spending in tourism and other services.
Retail sales, the main indicator of household consumption, increased in September by 5.5% year-on-year, better than expected.
– Follow-up calls –
But the government continues to face calls for measures to revive the economy.
As leaders unveiled a series of targeted stimulus measures for various sectors, particularly real estate, pressure is mounting for them to announce broader support.
The International Monetary Fund (IMF) on Wednesday called on China to implement a “comprehensive strategy to resolve problems in the real estate sector.”
“China’s weaker growth prospects in the near term will weigh on regional growth,” he said, adding that the country’s debt-ridden real estate sector would dampen demand in the region.
Bloomberg News reported last week that Beijing was considering issuing nearly $140 billion in sovereign debt to revive a struggling economy, with the money being spent on various projects.
However, observers say a spending as large as that revealed in 2008 during the financial crisis was unlikely.
In a sign of the need for more support, data released on Wednesday also showed that industrial production growth in September remained stable at 4.5 percent, while urban unemployment fell to 5.0 percent in September compared to 5.2 percent in August.
Unemployment data no longer includes the 16 to 24 age group, after reaching a record high of 21.3 percent in June.
Analysts polled by AFP forecast average annual GDP growth of 4.3% in the third quarter, while experts polled by Bloomberg predicted growth of 4.5%.
China is targeting growth of “around five percent” this year – compared to a low base last year, when the national economy was crippled by strict Covid restrictions.
Zhang Zhiwei of Pinpoint Asset Management said in a note that he believes “improved third-quarter economic data makes it less likely that the government will launch stimulus measures in the fourth quarter, as the growth target 5% should be achieved. “.
Last year, the economy grew 3 percent, far from the official target of 5.5 percent, and one of the slowest rates in four decades.
But Stephen Innes of SPI Asset Management warned that China still faced significant economic risks.
“High levels of corporate and local government debt, often considered unsustainable, pose a risk to the economy. Managing this debt without causing a financial crisis constitutes a significant challenge,” he wrote in a note.
At the same time, trade tensions with Washington as well as an aging population constitute “long-term structural deficiencies that could affect economic growth”, Innes added, warning that “the Chinese economy is by no means out of the woods.”
“The economic recovery is still in its infancy,” Harry Murphy Cruise, an economist at Moody’s Analytics, said in a note. “Direct support for households could be the aspirin needed to ease the homeownership hangover, but such support looks increasingly unlikely.”
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