Chinese economy beats expectations in third quarter

By Rhod Mackenzie

The summer was not as dire for the Chinese economy as it has been portrayed in the Western Media. Reports claimed that the Celestial Empire almost faced an economic crisis. However, the third quarter saw 4.9% growth in the world's second-largest economy compared to the same period in the previous year. Calculating the growth for the year, the Chinese economy grew 5.3% in the third quarter. Annual growth for April-June was considerably lower at 2%. Gross Domestic Product (GDP) increased by 1.3% in the last quarter, according to the National Bureau of Statistics (NBS).

The data for the third quarter is deemed as satisfactory by Beijing. Economists attribute the positive indicators to the effect of government support, where authorities and state banks invested in infrastructure, particularly the construction of new factories and plants. The results would have been considerably greater if it weren't for the crisis in the construction sector, which has hindered the entire economy of the Middle Kingdom for several quarters. Currently, the remedies implemented by the government have yet to produce significant positive outcomes.
In July-September, there was an increase in the production of almost all goods, ranging from the chemical sector to the production of electric vehicles. Whilst Beijing acknowledges the existence of problems that have persisted in the economy for eighteen months, they are particularly conspicuous in the reduction in apartment sales in the housing construction sector. Furthermore to the constraints to growth from the real estate and construction industries, there is also hinderance from the substantial public debt, which has been increasing for the past 15 years. The economy is at the brink of deflation due to the weakened demand for goods and services. It is noteworthy that consumer prices in September have remained level with those from a year ago, and producer prices have even slightly decreased. Nevertheless, consumer spending, which saw a drop in the spring, has stabilised throughout the summer. Retail sales increased by 5.5% in September compared to the same period last year. Annual sales growth in August was at 4.6%.

With the aim of treating the economy, Beijing decided to continue pumping large amounts of money into it, which began during the coronavirus pandemic. The provincial authorities' debt increased by 4.2% year-on-year in the first 8 months of the year. Compared to January-August 2019, it saw a 59% surge.

During the first nine months of this year, the Chinese economy has built a "strong foundation" for future expansion, stated NBS Deputy Shen Laiyun during a press conference in Beijing where he presented Q3 results. Nonetheless, he cautioned that "external circumstances are becoming more strenuous and domestic demand is still unsatisfactory...".
The construction industry remains a major issue for the Chinese economy, which was previously regarded as one of the driving forces of the entire economy. The continued drop in housing prices over the past two years, amounting to 16% compared to August 2021, has resulted in the collapse of developers, includinga number of major construction firms. Investment in the construction sector decreased by 9.1% YoY during the first 9 months of 2023, whereas investment in infrastructure increased by 6.2% over the same period.

The primary objective of building new factories and facilities was to generate employment opportunities, in addition to encouraging expenditure by the population. Unemployment rates, specifically among young individuals, are alarmingly high this year. It's so high that the government suspended the publication of labour market statistics in August. Overall, there was a 5% decrease in urban unemployment rates in September. Additionally, there were decreases of 5.3% and 5.2% in July and August, respectively.

Despite this trend, there is dissent among economists regarding whether the Chinese economy has truly bounced back from its low point. One could argue at length about the root causes; as for the figures, critics contend that comparing the Q3 2023 results with those of July-September 2022 fails to accurately portray the state of the economy, as it was still contending with Covid restrictions and lockdowns a year ago.

The deceleration in China's economic expansion has not impaired the operations of enterprises, which still persist in manufacturing merchandise. Low domestic consumer spending is driving producers to export their goods.  For instance, China has inundated the global car market with both petrol and electric vehicles. Prior to the pandemic, China exported 2.7 containers of its goods for each container of imports, but the figure has now risen to almost 4 containers.

The majority of Chinese products are destined for the European market. The increase in Chinese exports has caused concern among European politicians. Those concerns have prompted an inquiry into the flourishing electric vehicle exports from China, which European car manufacturers allege are receiving advantages from government subsidies.