China Q3 Economic Growth Rate 4.9%...Driven by Surge in Retail Sales (Comprehensive)

Expected to be lower than Hahoe... Growth rate higher than 2Q
Manufacturing production grows 6.9%... Stimulus effects

[Image source=EPA Yonhap News]

[Asia Economy Beijing=Special Correspondent Cho Young-shin] China's economic growth rate recorded 4.9% in the third quarter. After plummeting to minus 6.8% in the first quarter due to the impact of the novel coronavirus infection (COVID-19), China's economy succeeded in a 'V'-shaped rebound in the second quarter and continued its growth trend in the third quarter.

China's National Bureau of Statistics announced on the 19th that the gross domestic product (GDP) in the third quarter increased by 4.9% compared to the same period last year. Although this was lower than the market expectation of 5.5%, it showed growth for two consecutive quarters. Depending on the survey agency, estimates ranged from 4.8% to 6.2%.

In particular, retail sales increased by as much as 3.3% compared to the same month last year, thanks to the Chinese government's domestic demand activation policy. This was double the market expectation of 1.6%. Industrial production grew by 6.9% compared to the same month last year.

As the Chinese government focused on revitalizing domestic demand after effectively declaring victory over COVID-19, third-quarter growth was already anticipated. Key indicators such as the September export-import statistics, consumer price index (CPI), and manufacturing purchasing managers' index (PMI) released earlier suggested higher growth than in the second quarter.

According to the General Administration of Customs of China, exports in September amounted to $239.76 billion, an increase of 9.9% compared to the same period last year. Imports reached $202.76 billion, rising by 13.2%.

The manufacturing PMI, which indicates economic trends, rose to 51.5 last month from 51.0 the previous month. A manufacturing PMI above the baseline of 50 indicates economic expansion, while below 50 indicates contraction. The non-manufacturing PMI also recorded 55.9, higher than the previous month's 55.2, continuing an expansion phase for seven consecutive months.

The September CPI increase, which can gauge the domestic market in China, was only 1.7%, the lowest in 18 months. Consumer prices, which had shown instability due to COVID-19, floods, and the rise in pork prices caused by African swine fever, have stabilized. The CPI increase from January to September was 3.3%, reaching the Chinese government's early-year target of managing CPI increases around 3.5%.

The stability of consumer prices was also aided by the strengthening of the Chinese yuan. The yuan per US dollar continuously declined from a peak of 7.1316 yuan at the end of May to 6.7010 yuan on this day. Expectations for economic growth in the fourth quarter are higher in the Chinese financial market. Although somewhat premature, the dominant view is that domestic demand will normalize around the National Day holiday (October 1?8).

However, as the second wave of COVID-19 in the Western bloc, including the US and Europe, becomes a foregone conclusion, there is also analysis that China's economic growth may be limited. It is said that domestic demand alone has its limits. Additionally, since China is not an absolute safe zone from COVID-19, concerns are emerging that the winter resurgence of COVID-19 could again hinder China's economic growth.

This content was produced with the assistance of AI translation services.