"China Expected to Achieve 5% Economic Growth Next Year... Economic Improvement Forecast"

Seongsongcheong Former POBC Director of Survey and Statistics
"3rd Quarter GDP Rebound Is Not a Temporary Effect
Total Social Financing Increase, Expectation of Economic Improvement"
Pointing Out Residual Crisis in Real Estate Market

China's economic growth rate in the third quarter of this year has far exceeded market expectations, and thanks to the government's consumption promotion policies, it is forecasted that the country will achieve its 5% economic growth target next year as well.

Sheng Songcheng, former Director of the Survey and Statistics Department at the People's Bank of China (PBOC), stated in an interview with Bloomberg, "For stable economic development, China's economy needs to record a 5% growth rate next year," adding, "I believe this is achievable." Earlier, the National Bureau of Statistics of China announced that the country's Gross Domestic Product (GDP) in the third quarter increased by 4.9% year-on-year. Although this falls short of the 6.3% GDP growth rate in the second quarter, it surpasses market expectations.

Former Director Sheng explained, "The GDP rebound signal observed in the third quarter is unlikely to be a short-term phenomenon," noting that the total social financing, an indicator showing liquidity supplied to the real economy, is on the rise, suggesting a gradual economic improvement. Last month, China's total social financing reached 4.12 trillion yuan, expanding by 1 trillion yuan compared to the previous month (3.12 trillion yuan). This also exceeded the market forecast (3.8 trillion yuan) by 320 billion yuan.

Within China, analyses suggest that the government's measures to defend against economic downturns are proving effective. To revive the sluggish real estate market, the Chinese government provided liquidity support to real estate developers in the first half of this year and, in August, effectively lowered the Loan Prime Rate (LPR), the benchmark interest rate, by 0.1 percentage points to 3.45% per annum. Additionally, various real estate stimulus policies were implemented, including lowering the initial down payment ratio for home purchases and easing housing purchase restrictions in key cities.

Zhou Ran, Director of Financial Policy at the People's Bank of China, attributed the solid third-quarter economic growth rate to "a definite recovery in new real estate development loans and personal mortgage demand, as well as the faster growth of microloans and long-term manufacturing loans compared to overall lending."

As a result of the stimulus measures, new yuan loans in China last month surged to 1.36 trillion yuan, more than quadrupling from the previous month. During the same period, automobile sales reached 2.58 million units, marking an 8.4% increase year-on-year and turning to an upward trend. The increase in loans and vehicle sales indicates an improvement in consumer sentiment.

However, some analysts warn that the real estate market contraction remains unresolved and could pose a drag on economic growth. From January to September, total real estate development investment in China decreased by 9.1% year-on-year. The risk of a chain default among major Chinese real estate developers has yet to be resolved. Country Garden, a Chinese real estate developer, potentially entered its first default state on the 19th after failing to repay $15.4 million (approximately 2.13 billion KRW) in interest on dollar bonds maturing in 2025.

Bloomberg also conducted its own survey of economists, revealing that China's economic growth rate is expected to be only 4.5% next year.

Economists diagnose that additional stimulus measures are necessary for China to reach its 5% economic growth target next year. Robin Xing, Morgan Stanley's Chief China Economist for Asia, emphasized, "The reason China is expected to achieve around 5% economic growth this year is merely a base effect resulting from last year's low growth rate," adding, "To achieve 5% growth next year, proactive fiscal policies such as government bond issuance are required."

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