China’s economic growth picks up in third quarter, beating expectations

Beijing, October 19 - China's economic growth surged to 4.5% year-on-year in the third quarter, surpassing forecasts and easing pressures on policymakers to implement more aggressive stimulus measures, according to the National Bureau of Statistics (NBS). The growth rate exceeded the 4.4% prediction in a Reuters poll, marking an improvement from the three-year low of 4.3% in the April-to-June period.

Beijing's economic strategy heavily relies on exports, but this growth engine faces mounting challenges due to weak domestic demand and escalating trade tensions with the European Union.

China's monetary policy focus on redirecting credit and resources from property to high-tech industries has created a dual-speed economy, where robust factory output and exports mask weak consumption and private investment. For the first nine months of the year, the economy expanded by 4.6%, within the government's annual growth target of 4.5%-5.0%. On a quarterly basis, the economy grew by 1.2%, exceeding the anticipated 1.1% increase and accelerating from the 0.9% growth in the April-June period.

The trade surplus expanded more than expected in September, with exports surging, keeping China on track to surpass last year's record surplus of $1.2 trillion, potentially intensifying trade tensions with major partners. A deal with the EU to curb Chinese hybrid-vehicle shipments could negatively impact the booming auto trade. Beijing has recently bolstered support for homebuyers, introduced measures to direct cheaper credit towards infrastructure and technology sectors, and released 550 billion yuan ($82.28 billion) in unused government debt quotas to alleviate local governments' financial strain and stimulate infrastructure investment.

Authorities also heightened fiscal support, including expanding loan interest subsidies for small private firms and consumers, and leveraging an 800 billion yuan policy-based financing tool to spur infrastructure investment. However, infrastructure investment declined by 4.2%. Fixed-asset investment contracted 7.2% in the first nine months, shrinking at the same rate as the January-to-August period.

Retail sales increased by 1.1% in September, up from the 0.4% rise in August and better than the expected 0.6% rise, marking the fastest growth since March. Property investment fell by 20.6% in the first nine months, including a decline of 20.6% in September. Policymakers avoided large-scale stimulus measures, as robust goods exports, propelled by a global AI-fueled tech boom, are expected to help the country achieve its annual growth objective.

Industrial output expanded by 5.5% in September, up from the 5.2% growth in August and aligned with expectations. It marked the fastest growth in six months.