China’s GDP grew more than markets expected in the third quarter of 2023, suggesting its recent stimulus measures are starting to gain traction in the world’s second largest economy.
After weak quarter-over-quarter GDP growth of 0.5% in the second quarter of 2023, Chinese authorities announced various measures to support its declining property sector and equity markets.
The latest quarter-over-quarter GDP growth figure of 1.3% released by the National Bureau of Statistics of China was a marked improvement from the last quarter largely due to better-than-expected industrial output and retail sales figures.
And as the nation pushes for its annual growth target of 5%, its latest year-over-year 4.9% GDP growth for the quarter suggests it may still be achievable.
“Headline Q3 GDP came in much stronger than expected due to recent stimulus measures and it’s abundantly clear that the government’s 5.0% GDP growth target for the year is solidly back on track,” said David Chao, global market strategist for Asia Pacific ex-Japan at Invesco.
“What’s apparent is that growth concerns over the summer have been put to bed and the economy has turned the corner.”
Although the latest data does show signs the Chinese economy is stabilising, investment firms expect more support to come from policymakers in China.
“Economic and market sentiment remain subdued, hence we continue to expect an escalation in policy support to boost expectations,” said JP Morgan Asset Management’s global market strategist Marcella Chow.
“In the past quarter, we have seen gradual relaxation in property policies, approval of Rmb1.5trn refinancing bonds for local governments and proactive measures to activate capital markets.”
“It is expected that these measures may be escalated in upcoming months, supported by liquidity injection by the central bank.”
However, it is still unclear whether Chinese authorities will deliver the stimulus measures that the market is expecting, according to Chao.
“It’s clear to me that investors should not expect any kind of stimulus bazookas though further measures are needed for the flailing property market,” he said.
“Chinese equities jumped slightly on today’s economic print, before paring back gains. With growth on track to meet the annual target, investors may be disappointed to see lower prospects of further stimulus.”
Not all of the latest figures were entirely good news, according to Robert Carnell, regional head of research for Asia Pacific at ING.
“Anything related to the real estate sector continues to look troubled,” he said, pointing to slowing fixed asset investment growth, slowing property investment and an acceleration in the decline of property sales.
China’s heavily indebted property developers are still struggling to stay afloat in a declining property market as President Xi Jinping continues to reinforce his key message that “houses are for living in, not for speculation”.
Carnell said: “The adjustment taking place in the real estate sector is likely to be a multi-year phenomenon, so we should probably get used to seeing negative figures posted for these parts of the economy.”
“Nonetheless, today’s report shows that incrementally, China’s economy is making progress,” he added. “The pockets of weakness are likely to remain drags on growth for some time, but other parts of the economy are taking up the slack and cautious optimism is probably warranted.”
