It's actually better than expected. Chinese GDP in the third quarter increased by 4.6 percent year to year. It is true that it was slower than the quarter before (it was +4.7%), but slightly betterthan expected by the average expectations experts according to Reuters (+4.5%). Plus other data from the Polish morning time came from China (more on them in a moment), they were also better than forecast. But does this mean that China has finally managed to recover at a pace that allows the achievement of the goal of the Chinese Communist Party?
China. The economy is growing by 4.6%, but is it enough?
There is growth in the third quarter the weakest since the beginning of 2023 (then it was 4.5%). And although in accordance with European realities it seems very solid, it is not necessarily a great success for the Chinese economy, which has been developing very dynamically in the (pre-Covid) years – the second largest in the world. Beijing is targeting the entire year official growth target on the level “about 5 percent”. Meanwhile, the data from this year so far indicate that some may be missing.
“With real GDP growing 4.8% in the first three quarters of the year, the full-year GDP growth target of around 5% is now within reach thanks to additional stimulus in the fourth quarter,” says Tianchen Xu, senior economist at The Economist Intelligence Unit, cited by CNBC.
China announced such stimulus measures, which are aimed at encouraging the economy to rebound more strongly, last month, after a series of disappointing data. It is growing though waiting for the next stimulus packageand today's GDP reading may reinforce such expectations. China's statistics bureau wrote in a commentary on the data that the economy is “overall stable and making steady progress”, even in the face of the “complicated and difficult external environment” and the country's complicated economic development (we quote from Associated Press).
The consumer is not very willing to spend
Along with GDP dynamics, we learned several other readings. Industrial production in China it increased in September by 5.6 percent year on year – stronger than expected (4.6% growth was expected), a retail she went up by 3.2 percent (expected +2.4%), accelerating growth. The Chinese finally saw a slight improvement in the data.
Since the coronavirus pandemic, which in China meant numerous and strict lockdowns in large and economically significant areas of the country, the economy has been unable to recover strongly. What is disappointing is the attitude of consumers, who apparently do not feel confident enough to significantly increase their spending.
– To increase demand, it would be necessary to give Chinese families a larger share of GDP consumption. It is now very low, even for a developing country, let alone one that aspires to catch up with developed countries. This share will not increase because There is no de facto functioning social security system in China. The level of social services is so low that it forces families to save heavily. The Chinese need to save for old agebecause pension will be very low, for the diseasebecause insurance only covers very basic services, for children's educationwhich is only theoretically free, and then to help children start their adult lives – explained Dr. Michał Bogusz, an analyst at the Center for Eastern Studies, in a recent conversation with Next.gazeta.pl.
It is a serious problem – and one that has been growing for years, even before the pandemic – real estate crisis. According to the latest data, investment in real estate in China during the first three quarters of the year (January – September) decreased by 17.1%. year to year, and the number of new construction starts measured by usable area decreased by 22.2%. In September alone, real estate prices decreased by 5.8%.
– The problems come from this it is an overheated market. China is estimated to have already built enough living space to accommodate about two billion people – that's 600 million more than the country's population. Many of these apartments are emptywere created as investment projects and were purchased for this purpose – Michał Bogusz explained to us. You can read the entire conversation with the expert here: Everyone knows what to do, but no one wants to. China cannot recover economically. What is it about?
It is worth remembering that the Chinese economy is crucial for the entire world, not only because it is still largely a global “factory”. The growth rate in China, for example, determines the demand for raw materials, including crude oil, of which it is the largest consumer. If the Chinese slow down economically and produce less, their demand for oil decreases, which may affect global prices of the raw material.